As cane arrears hit R11,000 crore, the government is weighing proposals, including raising import duty on sugar to 40% and offering subsidised loans to mills against the excise duties paid by them over the last five years, to enable mills to clear the dues at the earliest.

Pointing out suggestions by stakeholders after a meeting of various ministers, including agriculture minister Radha Mohan Singh, transport minister Nitin Gadkari and petroleum minister Dharmendra Pradhan, food minister Ram Vilas Paswan said on Thursday the Centre will try its best to balance the interest of mills with farmers so that companies are not forced to shut business and farmers are not forced into distress.

Of the R11,000 crore cane arrears piled up so far this marketing year that started on October 1, Uttar Pradesh alone accounts for R7,200 crore. "We will consider all these proposals and have detailed discussions before taking a decision. If needed, we will approach the Cabinet or even the PM for arriving at an effective solution to the arrears problem," Paswan said after the meeting.

The government will now consider proposals such as raising the import duty on sugar to 40% from the current 15% to curb cheaper inflows from overseas and renewing commitment to make mandatory blending of ethnol with petrol at a 5:95 ratio with vigour, Paswan said. It will also discuss offering loans against the excise duties paid by mills over five years instead of the current provision of three years. This means, if approved, mills would get more subsidised loans beyond the amount of R6,600 crore decided by the CCEA earlier this year specifically to help clear cane arrears.

The government will also discuss the quantum of subsidy to be paid for raw sugar production until September 2015 instead of the current practice of reviewing the subsidy amount every two months.

Earlier this year, sugar mills, especially in UP, had expressed their inability to clear cane arrears due to an unprecedented liquidity crunch stoked by a drastic mismatch between prices of sugar and cane. So, in December, the CCEA decided to offer the interest subsidy on loans and interest burden, estimated at R2,750 crore over five years, would be borne by the Centre from the Sugar Development Fund. Mills will have to repay the loans in five years, with a moratorium on repayment in the first two years.

However, the delay in crushing in Uttar Pradesh and some other parts of the country by almost a month affected sugar production, as many farmers sold cane to other consuming industries, including jaggery makers.