Sugar industry to take Centre to court

The sugar industry is all set to challenge the recent amendment to the Essential Commodities Act, which seeks to introduce a fair and remunerative price (FRP) for sugarcane, besides absolving the government of a Rs 14,000-crore levy price obligation arising out of several court rulings.

The Act replaces the statutory minimum price (SMP) with FRP, but allows state governments to continue fixing the state advised price (SAP).

The amendment makes the Supreme Court decision of March 31, 2008, on levy sugar price inoperative, with retrospective effect. Opinion sought from legal experts by the industry states that the amendment can be challenged since its retrospective character aims at undoing the effect of two SC judgments without rectifying the problem of non-inclusion of additional cost, on account of higher SAP to mills, while calculating the levy sugar price.

"The Uttar Pradesh Sugar Mills Association is likely to challenge the amendment through a writ petition at a high court," said a source, adding that the petition could be filed sometime in mid-January, once the Bill became an Act. Earlier this month, both houses of Parliament passed the Essential Commodities (Amendment and Validation) Bill. It will become an Act after receiving an approval from the President.

Five states -- Uttar Pradesh, Uttarakhand, Punjab, Haryana and Tamil Nadu -- declare SAP, while others like Maharashtra, Karnataka, Andhra Pradesh and Bihar follow SMP (now FRP). Usually, SAP is substantially higher to the price fixed by the Union government and is announced with political gains in mind.

The central government buys 20 per cent of sugar produced by the industry at a price calculated on the basis of FRP. This sugar is known as levy sugar and is used for the public distribution system.

A number of cases have also been filed since the early 1980s seeking a SAP-based levy price for SAP-paying states. In its judgment in the Mahalaxmi Sugar and another versus Union of India (2008), the SC held that SAP fixed by the state government also needed to be factored in while fixing levy sugar prices. A few other judgments have also held the same.