Financial Daily from THE HINDU group of publications
Thursday, May 06, 2004
Agri-Biz & Commodities - Sugar
SC upholds States' power to fix cane prices
New Delhi , May 5
JUST when the going was good with prices looking up, the sugar industry has been delivered a body blow by a Supreme Court ruling upholding the right of State Governments to fix or `advice' cane prices over and above the Statutory Minimum Price (SMP) declared by the Centre.
A five-judge Constitution Bench, comprising the Chief Justice, Mr Justice S. Rajendra Babu, Mr Justice K.G. Balakrishnan, Mr Justice PV Reddi, Mr Justice B.N. Srikrishna and Mr Justice G.P. Mathur, today allowed the Special Leave Petitions filed by the Uttar Pradesh Government challenging an interim order of the Allahabad High Court on December 11, 1996.
That order, delivered by a Bench under Mr Justice M. Katju, had ruled that State Governments had no right to fix State Adviced Prices (SAP) for sugarcane to be payable by mills to growers.
Today's Supreme Court ruling by a 3:2 majority essentially reverses the earlier Allahabad High Court Bench order of 1996. Mr Justice Babu, Mr Justice Balakrishnan and Mr Justice Mathur ruled that State Governments could provide for SAPs over and above the SMP notified by the Centre under the Sugarcane Control Order, 1996. Mr Justice Reddy and Mr Justice Srikrishna, however, held that mills could not be coerced to pay the higher `adviced' price as there was no statutory backing for it. Mr Justice Srikrishna noted that the UP Sugarcane Act, 1953 did not contain any provision for the State Government to fix the SAP for cane supplied by growers to sugar mills.
The Supreme Court had earlier bunched together the petitions filed by the various parties on the issue and also completed its hearings by the middle of September, while reserving a final order. The present timing of its order is significant as it comes in a scenario where ex-factory sugar prices are ruling at over Rs 1,450 per quintal, compared to 1,050-1,100 per quintal just six months ago. With prices firming up, there would be an obvious temptation for State Governments to `advice' higher cane prices in order to appease cane growers.
Moreover, with drought conditions forcing a shrinking of cane area in States such as Maharashtra, Karnataka and Tamil Nadu during the current as well as the coming 2004-05 sugar seasons (October-September), the fundamentals are poised more favourably towards growers than the mills, who are facing a shortage of raw material for crushing.
This is as against the situation prevailing in the 2002-03, when the industry crushed a record 194.36 million tonnes of cane and produced 20.14 mt of sugar.
The Supreme Court's ruling comes as a major shot in the arm for the UP Government under Mr Mulayam Singh Yadav, which had rejected an earlier cane package announced by the Centre.
The package had proposed Central assistance to clear cane SAP arrears of mills to growers during the 2002-03 season, while linking this to the States withdrawing their SLPs against the Allahabad High Court's interim order.
Mr Yadav and his coalition partner, the former Agriculture Minister, Mr Ajit Singh, are likely to try and make a political capital out of the latest order, which apparently vindicates their position.
In fact, the key cane-belt constituencies of UP are scheduled to go for polls only in the last phase of May 10. These include Ghaziabad, Khurja, Baghpat, Meerut, Muzaffarnagar, Kairana, Saharanpur, Meerut, Bulandshahr, Sambhal and Moradabad.
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