Announcing tax breaks to end the impasse in the sugar industry, the Uttar Pradesh government today warned sugar mills of legal action if they did not start operations by next week.

Worried over farmers backlash over sugar mills not buying standing sugarcane crops, the Akhilesh Yadav government announced waiver of entry tax and purchase tax to soften the high procurement price.

99 private mills out of the state’s 122 units have refused to start sugarcane crushing from October as they found the Rs 280 per quintal price set by state government as unviable, prompting even Centre to consider a financial bailout package for the industry.

The sops announced after three rounds of talks with factory owners, however, came with the caveat that the price of Rs 280 per quintal to be paid to farmers was not negotiable and they will face action if they do not start operations.

“There is no scope for further talks (with millers). We are giving direction to start mills or face action,” the state Principal Secretary, Sugar Industry and Cane Development, Rahul Bhatnagar said here.

In New Delhi, the Food Minister K V Thomas said the Centre was working on a financial package that may include interest free loans to the millers to break the logjam that not only was threatening sugar output but also sowing of the next crop, wheat.

The Prime Minister Manmohan Singh has already set up an informal group under Agriculture Minister Sharad Pawar to work out the package.

The Uttar Pradesh government has already booked three mill owners in the sugarcane belt of Muzaffarnagar for failing to start operations.

Mill owners did not immediately say if the package announced by the state government was enough for them to start operations.

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