Sugar Mills in Uttar Pradesh to Challenge State-Set Cane Price, Move Court

Mills in India’s biggest sugar cane- growing state plan to move court to challenge the price of cane set by the provincial government for the 2010-2011 season, an official from a producers’ group told reporters in New Delhi.

Mills in Uttar Pradesh will approach the Allahabad High Court in two days, said the official, who didn’t want to be identified.

Crushing of sugar cane in the state that’s home to more than 100 mills may begin after Nov. 20 as the court may decide on a price by then, the official from the Uttar Pradesh Sugar Mills Association said.

The Uttar Pradesh government last week increased prices mills must pay growers for cane to as much as 210 rupees ($4.7) per 100 kilograms (220 pounds), up from 170 rupees last year, a level deemed high by producers as domestic output is forecast to exceed demand for the first time in three years.

Producers in Uttar Pradesh pay a so-called state-advised price. The rate, aimed at shielding 4 million cane farmers, is usually higher than the floor rate set by the federal government.

“At current domestic sugar prices, it may not be feasible to pay the cane price” fixed by Uttar Pradesh, Abinash Verma, director general of the Indian Sugar Mills Association, said in an interview on Nov. 2. “If prices stay at current levels, it is difficult for mills to pay the state-advised price for cane.”

Growers will withhold supplies if mills don’t pay at least 280 rupees, Rakesh Tikait, national spokesman of the Bharatiya Kisan Union, a farmers’ group, said in an interview on Nov. 2. Factories paid an average 285-290 rupees last year to secure cane amid a shortfall in production.

To contact the reporter on this story: Prabhudatta Mishra at pmishra8@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net