The government could raise import duty on sugar to protect local mills if they clear farmers' cane arrears, Food Minister Ram Vilas Paswan told reporters on Thursday.
In June, the minister had said import duty could be raised to 40 per cent from 15 per cent. Higher duty will halt imports of the sweetener in the world's biggest consumer and support local prices.
"We are ready to raise the import tax and allow ethanol blending to 10 per cent, give some soft loans and export incentives for raw sugar but mills need to assure that they will clear farmers' dues," Paswan said after a meeting of mill owners and representatives of cane growing states.
Sugar mills in Uttar Pradesh, the second-biggest producer in the country owe farmers over Rs 5,000 crore, which they haven't paid due to lower sugar prices.
Mills in the state have decided to suspend operations during the next season starting October 1 2014 saying they are unable to pay the higher price set by the state government.
"We're taking initiatives to help end the impasse but we want mills to clear cane arrears and start cane crushing next (sugar) year, " Paswan said.
Mills in Uttar Pradesh are often at loggerheads with the state government, which typically forces sugar companies to pay a premium to farmers over the cane price fixed by the state government.