The standoff over sugarcane price in Uttar Pradesh and Maharashtra snowballing into a political controversy, the Centre on Thursday stepped in with Food Minister K V Thomas indicating a package including likely soft loans to millers so that crushing is not delayed affecting sugar overall production in the country.

Thomas projected a three per cent drop, from 25.1 million tonnes (251 lakh tonne) last year to 24.4 million tonnes. With domestic demand pegged at 23.5 million tonnes (235 lakh tonne) and an opening stock of 8.9 million tonnes (89 lakh tonnes), there was no need to panic, Thomas said.

The crisis over sugarcane price in these major sugar producing states if it continues, may affect output. The crisis in UP is showing no sign of ebbing. Thomas said 101 of the 170 mills in Maharashtra, and 50 out of 122 in UP have started functioning. The Indian Sugar Mills Association, however, rejected tax incentives offered.

Thomas said, "State government should take the initiative... Whatever assistance is needed from the government of India, we will do it within our norms."

Private sugar mills refused to pay the recommended MSP, drawing the opposition, particularly BJP, to target the government. Thomas held talks with Finance Minister P Chidambaram and Prime Minister's Economic Advisory Council Chairman C Rangarajan on a package.