Govt to amend cane price rule after farmers' protests

By Mayank Bhardwaj and Nigam Prusty

NEW DELHI (Reuters) - The government will change a new sugarcane pricing rule that provoked protests, putting the onus back on mills to pay the difference if state governments raise floor rates fixed by the central government.

The government would delete the contentious part of the new cane pricing rule, Railways Minister Mamata Banerjee told reporters after a meeting of senior ministers on Friday.

Tens of thousands of farmers marched to the capital on Thursday demanding higher cane prices, forcing the adjournment of parliament, the culmination of weeks of protest in Uttar Pradesh, which produces almost half of the country's cane.

Cane farmers said the new rule, where states had to carry the cost if they raised the cane floor rates fixed by the federal government, would curtail their bargaining power.

"We have agreed to farmers' demand in larger interest," Banerjee said, adding the government would introduce legislation in parliament on Monday to change the rule.

The government had fixed the price mills must pay farmers for at 129.84 rupees ($2.80) per 100 kg for the 2009/10 crop year.

The truce would pave the way for crushing, which had been delayed, said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd.

The protest has hampered crushing in Uttar Pradesh (UP), raising fears of more imports by India, a major factor in helping global sugar prices double this year.