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

Worried over farmer 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,” state Principal Secretary Sugar Industry and Cane Development Rahul Bhatnagar told reporters.

In New Delhi, 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.

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

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.

Elaborating on the nature of sops, Bhatnagar said that with the government giving an exemption of Rs 2 per quintal in cane purchase, mills would benefit by Rs 160 crore.

Besides, they have also been exempted from entry tax through which they would benefit by Rs 219 crore.

Bhatnagar said that if the mills do not start crushing by the decided dates they would be deprived of these exemptions.

The official said that if all the exemptions and benefits given to the millers are taken into account the mills would benefit by Rs 20 per quintal.

“The government has decided that after three months, after considering the market price of sugar the financial burden on the mills would be reviewed again and necessary steps would be taken,” Bhatnagar said.

He said that government firmly believed that through these benefits the viability of the mills would be maintained and so they need to start crushing immediately.

“Earlier the mills were given the ultimatum to start crushing by November 25 but since talks were on no action was initiated but there would be no such laxity any longer,” Bhatnagar said.

It might be recalled that a series of talks with Uttar Pradesh Chief Minister Akhilesh Yadav, chief secretary Javed Usmani and other senior officials earlier this week to resolve the crisis, had failed to break the deadlock.