The sugar sector stalemate in Uttar Pradesh seemed headed for some resolution on Tuesday with the state government holding a second round of meeting with industry honchos to ensure that mills start procurement and crushing of cane at the earliest.

While the government has struck down the millers' demand of lowering the cane SAP of Rs 280 per quintal and granting a Rs 3,000-crore subsidy, it has veered towards granting some concessions in the form of tax waiver and commissions.

Industry leaders such as Kushagra Bajaj of Bajaj Hindusthan, Vivek Saraogi of Balrampur Chinni Mills, Ajit Sriram of DSCL and CS Nopany of the Birla Group met chief minister Akhilesh Yadav late on Tuesday. While the meeting remained inconclusive, there was hope of a solution as another meeting was scheduled for Wednesday.

Millers, on their part, repeated their demand of lowering the cane SAP to Rs 225 per quintal citing the resultant high cost of production and low market price of sugar. They said the government should otherwise grant them a subsidy to meet the gap between the cane price they can afford (Rs 225 per quintal) and the current SAP of Rs 280 per quintal, which would result in an outgo of Rs 3,000 crore for the government.

The government, however, cited the strained state exchequer for its inability to grant a subsidy. It also firmly ruled out lowering the SAP.

The meeting considered granting a few concessions to the industry such as the waiving off of society commission and entry tax on sugar with the government showing its willingness to consider them.

The state government imposes a society commission of Rs 6.30 per quintal of cane which does not go to the state exchequer and it could be waived off, said an industry source. Also the waiver of the 2% entry tax on the invoice price of sugar sold in UP was also considered at the meeting.

He said that while the waiver of the two taxes might not be enough to make operations of mills viable, the central government was also expected to take some industry-friendly measures and if things proceed quickly, they may consider starting mills by the end of this week.

Ministerial panel to look into demands

NEW DELHI/PUNE: Prime Minister Manmohan Singh on Tuesday formed a ministerial committee to look into the demands of the sugar sector. The committee is headed by agriculture minister Sharad Pawar and will have finance minster P Chidambaram and civil aviation minster Ajit Singh as members.

The decision was taken after all-party delegation from Maharashtra, headed by CM Prithviraj Chavan, along with a farmer union met the PM to resolve the cane price issue in the state.

The group has demanded an export subsidy Rs 500 per quintal, an increase in import duty to up to 40% and interest-free loans for sugar mills to meet their capital requirements.

The group has also asked for an increase on the cap on ethanol blending from the current 5% to 15%.