The Andhra Pradesh High Court has held that the State Oil Palm (Regulation of Production and Processing) Act 1993, empowers the State Government to fix the minimum price of oil palm fresh fruit bunches (FFBs) using its own methodology.

The court said that the Government need not follow the pricing formula recommended by the Commission for Agricultural Costs and Prices (CACP).

However, the Court clarified that the Oil Extraction Ratio (OER) used to determine the price must have a rational basis in relevant data. The State must be able to explain how the chosen ratio is supported by evidence concerning oil extraction from FFBs originating in Andhra Pradesh.

The CACP, a body under the Union Ministry of Agriculture, had studied the pricing of oil palm FFBs and recommended a pricing formula based on the weighted average prices of crude palm oil and palm kernel nuts.

Pending the establishment of testing centres to determine the actual oil content, it recommended an interim OER of 18% as the basis for the pricing formula. It also recommended that the OER be determined with reference to the actual oil content extracted by the processing industry in the past, as established by the concerned State Government.

The statutory framework for this determination is provided under Section 13(1) of the Andhra Pradesh Oil Palm (Regulation of Production and Processing) Act, 1993, which empowers the State Government to fix the minimum price of oil palm FFBs or authorise the Oil Palm Commissioner to fix such price, subject to Government guidelines.

Against this backdrop, the State Government issued G.O.Rt. No. 72 dated February 4, 2026, fixing the OER at 20.01% for the 2025–26 oil year. For this purpose, it adopted the pricing formula prescribed by the Telangana Government under G.O.Rt. No. 594 dated December 18, 2025, instead of determining the ratio on the basis of data specific to oil palm processing in Andhra Pradesh.

Aggrieved by this fixation, the Oil Palm Developers and Processors Association and its member companies challenged the Government Order, along with the consequential monthly orders issued pursuant to it, as arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution.

A Single Judge Bench of Justice Dr. Venkata Jyothirmai Pratapa, while examining whether the specific OER of 20.01% had a rational basis in the relevant data, observed:

“The question, however, is whether that consideration provides a rational basis for the particular figure of 20.01% adopted by the Government. The record does not disclose the calculation or other methodology by which 20.01% was derived. The actual processing of Andhra Pradesh-origin FFBs at Aswaraopeta yielded 19.36%. The material therefore establishes a tested figure on Andhra Pradesh-origin fruit, but does not disclose the basis for adopting the higher figure of 20.01% in its place.

However, the minutes of the meeting dated 29.01.2026, as placed before the Court, make no reference to this Aswaraopet result and instead record an OER of 20.01% at Apparaopet and 16% at Siddipet, both in Telangana. The record does not disclose that the 20.01% recorded at Apparaopet was obtained from Andhra Pradesh-origin FFBs, nor does it disclose any calculation or methodology connecting that figure with the Andhra Pradesh-origin FFB data. The record further contains an OER of 19.34% relating to M/s Navabharat, a private Andhra Pradesh processor. In these circumstances, while the Government was entitled to evolve its own methodology and to take processing efficiency into consideration, independent of the CACP formula, the particular figure of 20.01% has not been shown, on the material placed before the Court, to rest upon a rational examination of the relevant data concerning Andhra Pradeshorigin FFBs. On this limited ground, the impugned fixation cannot be sustained.”

The petitioners' principal grievance was that the OER of 20.01% had not been shown to be based on the actual oil extracted by processing units in Andhra Pradesh during the relevant preceding period.

They also questioned the absence of material explaining whether the figure was based on actual oil extraction data from Andhra Pradesh or on figures from processing units in Telangana.

The petitioners also contended that, under the CACP-recommended formula, the OER was to be determined with reference to the actual oil content extracted by the processing industry in the past, as established by the concerned State Government.

The State defended the Government Order, submitting that it was based on CACP recommendations, past OER data, technical studies and stakeholder views recorded at a meeting held on January 29, 2026. It argued that oil recovery depended not only on FFB quality but also on plantation conditions, farming and harvesting practices, and processing efficiency.

In support of its stand, the State relied on a technical audit conducted by the Telangana State Oil Federation (TGOILFED) at a processing unit in Andhra Pradesh. The audit identified deficiencies relating to boiler steam flow, oil losses in by-products and operator skills, which could affect oil recovery.

The State also referred to an exercise in which 862.210 metric tonnes of FFBs from the Andhra Pradesh Oil Federation (APOILFED) zone were processed at a TGOILFED facility in Telangana. The exercise recorded an OER of 19.36% and was intended to assess oil recovery from Andhra Pradesh-origin FFBs.

However, the Court noted that the minutes of the January 29, 2026 meeting did not refer to this 19.36% result. Instead, they recorded an OER of 20.01% in Telangana, without explaining how the figure was derived from data concerning Andhra Pradesh-origin FFBs.

The record also contained an OER of 19.34% recorded by a private Andhra Pradesh processor, but did not explain the basis for fixing a higher ratio of 20.01%.

Clarifying its decision, the Court stated that it was not holding that data from other States could never be considered, nor was it directing the Government to adopt the OER of 19.36%.

The issue was whether the figure of 20.01% was supported by relevant data concerning Andhra Pradesh-origin FFBs. Consequently, the Writ Petition was partly allowed.

The Court did not substitute its own assessment for that of the Government or prescribe a particular OER.

Accordingly, the Court set aside the Government Order dated February 4, 2026, insofar as it fixed the OER at 20.01% for the 2025–26 oil year, along with the consequential monthly orders.

The Court directed the competent authority to refix the OER and the resulting price of FFBs within eight weeks of receiving a copy of the order, leaving the determination of the appropriate ratio to the authority.

Payments already made will remain subject to the fresh determination, with any excess or shortfall adjusted against future payments in accordance with the applicable rules and law.

Counsel for the Petitioners: CKR Associates.

Counsel for the Respondents: The Advocate General, M.P.V.N.V. Sastry, Standing Counsel for AP OILFED, T. Niranjan, Deputy Solicitor General of India, Kolluru Giridhar & Kambhampati Ramesh Babu.