A day after the Centre announced incentives, including additional subsidised loans of around Rs 4,400 crore, to the sugar industry to help it clear cane arrears, the Indian Sugar Mills Association (ISMA) asked the Centre to persuade northern states like Uttar Pradesh to link the prices of sugarcane with that of sugar.

The Centre has promised to offer the loans at an interest subsidy of up to 12%, raise an import duty on sugar to 40% from the current 15% and even double the blending level of ethanol with petrol to 10% if the industry gives an assurance that it would clear all cane arrears amounting to roughly R11,000 crore at the end of May. Uttar Pradesh alone accounts for around R7,000 crore cane arrears.

While hailing the Centre's decisions, ISMA president Ajit Shriram said linkage between cane and sugar prices was a must for survival of mills.

“We would continue to submit to the government for an immediate policy reform, that is adoption of the linkage formula for determining the cane price at 70% of the sugar price and its by-products.... This will ensure survival of the industry and at the same time zero cane price arrears to the farmers,” Shriram said.

He added that this formula has been adopted by many of the western and southern states in the country, including two major producers Maharashtra and Karnataka. Gujarat, too, follows a similar kind of system.