Uncertainity loomed on Thursday over the availability of additional subsidised loans of Rs 4,400 crore to cash-starved mills across the country, as the Centre made it clear on Wednesday that it wouldn’t take any further step to ease the sugar sector crisis in Uttar Pradesh. Although the Centre wished dues owed to farmers for their cane supplies to mills be cleared at the earliest, food and consumer affairs minister Ram Vilas Paswan said that the UP government needed to initiate any steps it deemed fit to help clear the cane arrears, which stood at Rs 4,626 crore as of September 3, and that the Centre had a limited role in the crisis.

“We have asked the state government to take whatever steps possible to clear cane arrears at the earliest. But we can’t take any further steps now. We have done our best to resolve the crisis but ultimately it’s a state’s problem and the state government has to deal with it,” Paswan said, while listing his ministry’s initiatives in the last 100 days.

Although Paswan said his ministry could still consider the proposal to facilitate cheaper loans, provided sugar mills assured the government they would clear cane arrears within a specified date, the enthusiasm seen in June when the plan was orginally floated was visibly missing.

Even food secretary Sudhir Kumar stressed that the Centre’s cane pricing policy was crystal clear and the crisis in UP was the result of the state’s own action.

In June, after an inter-ministerial meeting, Paswan had announced that the Centre had decided to offer additional loans at a 12% interest subvention, if mills give an undertaking they would clear cane arrears at the earliest. Mills were granted subsidised loans of R6,600 crore by the CCEA in December. However, these loans were to be used exclusively for payment to farmers for cane supplies.

Among other decisions taken in June, he said the government could raise the import duty on sugar to 40% from 15% then to curb cheaper inflows from overseas. It would also renew commitment to make mandatory blending of ethnol with petrol at a 5:95 ratio with vigour — which would be raised to the 10:90 ratio in the long run — to fetch more buyers and ensure competitive prices for the cane by-product.

However, since then the Centre has raised the import duty on sugar to 25%, instead of 40%, from 15% before, as it sought to balance the interest of producers with consumers. Beyond this, no other decision has been notified. Analysts have argued that the Centre shouldn’t pay for the state’s mistakes, so it must refrain from offering dole-out packages to compensate for UP’s faulty cane pricing policy.

Mills in UP, which have already threatened to suspend operation in the next sugar season starting October, have consistently maintained that the state government’s “arbitrary” fixing of cane price at elevated levels when sugar prices remain subdued is to be blamed for the cane arrears. While the Centre had fixed the cane price at R210 per quintal, the state advised price of the raw material in UP was as high as R280 per quintal, although the state had initially offered incentive worth R11 per quintal.

Last week, the Allahabad High Court ruled that farmers who were yet to receive payment for cane supplies had the first right over mills’ sugar sales realisation, and not banks that had lent to the mills concerned. It also directed district magistrates to monitor as well as “co-operate” with defaulting mills in offloading their sugar stocks at best possible prices and that all cane arrears be cleared by October 31.

While banks are considering approaching the Supreme Court against the order, mills apprehend that lenders could cut down on loans to the sugar industry due to such an order. Moreover, forcible sale of stocks could further drive down sugar prices in a market already witnessing a glut.