Finance

Ten sugar mills in UP to pay 12% simple interest on delayed payment to farmers

Under the Act, sugar mill owners are bound to pay interest if they fail to make the payment to farmers within 14 days of purchase.

Complying with an Allahabad High Court order, the Yogi Adityanath government has asked 10 sugar mills in the state to pay 12% simple interest to the farmers for the late payment of their sugarcane dues for three financial years: 2012-13, 2013-14, and 2014-15.

These 10 mills will have to pay the interest for the years when they were making profits. Hence, the three units of Simbhaoli Sugars – Simbhaoli, Brijanathpur and Chilwaria —will have to pay interest for the crushing season 2012-13, while JHV Sugars’ Gadaura sugar mill, Laxmiji Sugar’s Moradabad unit and Kanoria Sugars’ Captanganj unit will have to pay interest for the 2012-13 and 2013-14 seasons. Sherwani Sugar’s Neoli unit, KM Sugar Mills’ Motinagar unit and United Province’s Seohari sugar mill will have to pay interest for 2013-14. Apart from this, one UP sugar cooperative federation’s unit, Sneh Road, in Najibabad will also have to pay 12% interest for 2012-13.

In separate notices to these sugar mills, UP Cane Commissioner, Sanjay Bhoosreddy has said that as per the provisions of Section 17 (3) of the Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953, these mills must ensure to pay 12% annual interest to the farmers through their respective cane societies. In case they fail to do so, the department would be forced to issue recovery notices on them under Section 17 (4) of the same Act.

Under the Act, sugar mill owners are bound to pay interest if they fail to make the payment to farmers within 14 days of purchase.

Although the commissioner had fixed 12% interest rate to be payable by profit-making mill owners and 7% for the other mills which are not so profitable in March 2019 itself, the state government had been procrastinating on giving its approval, thereby delaying the actual payout to the farmers.

In an affidavit submitted to the court, the Cane Commissioner denied that there had been any non-compliance on his behalf and said that under the Act, it is the state government that is to take the final call with regard to payment of interest. Accordingly, he has forwarded his March 2019 instructions to the state government for its nod.

However, coming down heavily on the Cane Commissioner, the single-judge bench of Justice Abdul Moin, in its 9 December order, a copy of which is in possession of FE, said that sub section (3) of Section 17 of the Act, indicates that it is only when the Cane Commissioner is directing for payment of interest at a reduced rate or no interest is being directed to be paid then it requires the approval of the government.

“The natural corollary to Section 17 (3) of the Act, 1953 is that where interest has been awarded at the rate specified (12% per annum) no approval shall be required from the state government,” the order states, adding that even if the rate of interest has been awarded at a lesser rate through the order in March 2019, a period of two and a half years have lapsed merely because the government has proceeded not to pass an order. “It cannot be expected that for years on end, the applicants (farmers) wait for an approval and thus prima facie, a case of contempt is also made out against the state government,” the order stated.

“It is apparent the Cane Commissioner has willingly sat over the matter despite having passed an order for payment of interest at the specified rate under the Act, under the pretext of taking the approval of the state government,” the court said, directing the cane commissioner to file a compliance affidavit on 17 January 2022, or else appear before the court.

The bench was hearing a contempt petition filed by farmer leader VM Singh against the state for its failure to implement the 2017 direction, which was given on a batch of petitions by various farmers’ organisations.

“The farmers have been waiting for their interest payment since January 2014, when the Allahabad HC had fixed 15 per cent as late payment interest,” Singh said. However, mill owners at that time, had approached the then Akhilesh Yadav government, with a request to waive the interest part of the payment as the industry was going through a precarious condition. As a consequence, in October 2016, the Akhilesh Yadav cabinet waived the interest of around `2,000 crore owed by mills to farmers, which was then challenged by the VM Singh, convenor of Rashtriya Kisan Mazdoor Sangathan (RKMS).

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