ISLAMABAD, June 15: Sugar mills have told the federal government that they would not be able to meet the June 30 deadline for clearing the outstanding payment of around Rs40 billion to sugarcane growers.

The Ministry of Food, Agriculture and Livestock (Minfal) had given the deadline to the Pakistan Sugar Mills Association (PSMA) early this month following reports by provincial agriculture departments that thousands of growers in Sindh, Punjab and the NWFP were yet to receive payment for their 2007-08 crop.

Minfal had warned of taking action against those mills which failed to clear payments by “blacklisting” them.

Sources in Minfal told Dawn on Sunday that the food ministry had set the deadline after provincial agriculture departments informed it that farmers were facing immense financial problems and were in no position to support inputs for the coming crops as sugar mills had withheld their money.

Provinces fear a sharp decline in sugarcane production this year if farmers don’t get their dues.

However, the PSMA has now asked Minfal to extend the deadline.

The association, sources said, informed Minfal that millers could start releasing payments to farmers from August.

The PSMA said it would pay to farmers if the government procured at least 150,000 tons of sugar from mills through the Trading Corporation of Pakistan (TCP) on higher than market rate before the end of this month.

An official of the PSMA told Dawn while requesting not to be named that the association had told the government that it was in no position to borrow from banks in order to pay it to farmers.

He said the State Bank last month increased interest rate for the running capital to 15 per cent from 12 per cent and millers could not take loan at such a higher interest rate.

On the other hand, Minfal asked cane commissioners to observe the situation of payments on a daily basis and list the mills not paying to farmers.

The PSMA official said the government had agreed to buy 150,000 tons of sugar from mills this month at Rs29.50 a kg.

He said the mills would pay the money it had got from the government on account of purchasing their sugar through the TCP.

The government recently procured 50,000 tons of sugar from the TCP. But, the PSMA is pressing it to procure more.

The PSMA said that mills possessed over two million tons of sugar stocks.