Government could help sugar mills pay higher cane prices: food minister

By Mayank Bhardwaj

NEW DELHI (Reuters) - India could give financial assistance to sugar mills to help them pay farmers higher prices for cane, Food Minister K.V. Thomas said on Thursday, as surplus production pushes retail prices ever lower.

The impasse between farmers and millers over price has delayed the start of cane crushing, which usually takes place at the beginning of November. The longer the situation continues the greater the impact on production will be, though stocks are comfortable for now.

"We are willing to consider all possible assistance to sugar mills so that cane crushing can start as soon as possible," Thomas told reporters.

Prime Minister Manmohan Singh has set up a committee comprising the food, farm, oil and civil aviation ministers to look into the demands of mills.

"The committee will meet soon and decide on the demands of mills," he said.

The industry has been demanding an increase in import duty, interest-free loans for mills, subsidies for exports and creation of buffer stocks to help mills.

Sugar cane crushing normally starts in the first week of November in Maharashtra and Uttar Pradesh, the country's top two producing states. But this year it has been delayed as farmers and mills could not reach an agreement over the cane price.

Farmers want prices increased to compensate for a rise in fuel and fertiliser costs, while millers want to reduction to reflect falling retail prices.

India, the world's second biggest sugar producer, is expected to produce 24.4 million tonnes in the year to September 2014, exceeding estimated annual demand of 23 million tonnes, Thomas said.

Indian sugar dealers have signed contracts to export nearly 500,000 tonnes of raw sugar between December to February.

The delay in crushing is unlikely to delay shipments by more than a few weeks, dealers said.

(Reporting by Mayank Bhardwaj; Writing by Rajendra Jadhav; Editing by Jo Winterbottom and Simon Cameron-Moore)