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The Allahabad High Court decision on Monday upholding a State Advised Price (SAP) of Rs 125 per quintal for cane procured in Uttar Pradesh in the 2007-08 season, could require leading sugar producers based in the State to reverse a portion of their reported profits for 2007-08.

Large private producers in the State, including Bajaj Hindusthan, Balrampur Chini Mills, Triveni Engineering and Dhampur Sugar Mills had reported their financials for 2007-08 based on a cane price assumption of Rs 110 per quintal.

The mills made this assumption based on an interim order of the Court and had stated that they would consider necessary adjustments, once the final order came through. Now that the Allahabad High Court has pronounced its final judgment, a restatement of financials may be required.

The only alternative before the millers on the cane price issue is to approach the Supreme Court. They are said to be considering a special leave petition against the latest judgment.

Estimates suggest that mills in Uttar Pradesh crushed 754.2 lakh tonnes of cane in the 2007-08 season (October- September).

An SAP of Rs 125 (instead of Rs 110) per quintal of cane would mean an additional obligation of about Rs 1,131.3 crore for mills in the State towards cane procurement prices for the season.

Of the cane crushed, private sector mills account for the lion’s share at 643.4 lakh tonnes. An increase of Rs 15 per quintal translates into an increase of about Rs 965 crore on procurement prices for the private mills.

Mills in the State had contested the SAP of Rs 125 per quintal fixed by the State Government in the Allahabad High Court on the grounds that the cane prices fixed were “arbitrary”.

The final order of the Allahabad High Court has now settled the issue in favour of the State Government.

Not only has the Court drawn attention to the State Government’s powers to fix SAP as upheld by an earlier Supreme Court ruling, it has also said that mills have to clear any cane arrears, based on the SAP of Rs 125 per quintal, within a period of two months.

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