"Since the government has unduly delayed announcement of levy price for the 1998-99 sugar year (September-October) we have asked them to pay us 18 per cent interest on arrears worth Rs 300 crore," Isma director general SL Jain said.

Government is yet to fix the price for the 40 per cent levy sugar that it procured during 1998-99 from the millers for supply through the Public Distribution System (PDS).

While the government had declared the levy price for 1997-98 season in July last year, the announcement this year was delayed by the general election, official sources said.

Jain said the industry has already made its plea before the minister for consumer affairs and public distribution, Shanta Kumar and secretary department of edible oils P Shanker, besides the development council for sugar industries.

Jain said Isma had proposed 18 per cent interest on outstanding dues to the tune of Rs. 300 crore for a period of six months.

Isma and the National Federation of Cooperative Sugar Factories (NFCSF) are expecting the government to effect a 60 paise per kg increase in levy price from last year's levy price of average Rs. 10.22 per kg. Jain said the industry expected the centre to pass on the 60 paise per kg hike effected in issue price of sugar to states for PDS in the form of higher levy price.

Government is likely to announce the levy price and Statutory Minimum Price (SMP) for sugarcane for the current year after Diwali, and proposals of the sugar and edible oil department on these are awaiting the approval of the Cabinet Committee on Economic Affairs (CCEA), sources said.

Following the delay in announcement of levy price and borrowing of about two lakh tonnes of sugar from the industry by the Centre for PDS, mills' arrears to sugarcane growers was well over Rs 1,000 crore, NFCSF managing director MS Marathe said.

"Only way to clear the mounting arrears and interest rate is by an early announcement of the levy price," he said. Jain said the sugar production during the current season was likely to be 160 lakh tonnes compared to about 155 lakh tonnes produced during the last year.

"The good condition of the crop and an increase of 3-5per cent in acreage under cultivation will see the sugar output rising to 160 lakh tonnes in 1999-2000," he said.

The country is currently saddled with a carry-over stock of nearly 6.6 million tonnes of sugar, besides increasing imports of cheap sugar from countries like Brazil, China and Thailand.