New Delhi, Dec 6 (IANS): The government is likely to provide financial aid, including interest-free loans, and ease mandatory ethanol-blending norms to help cash-strapped sugar mills sustain their operation, Agriculture Minister Sharad Pawar said Friday.

A ministerial panel headed by Pawar recommended the financial help for the sugar mills.

Talking to reporters after the ministerial group meeting, Pawar said the government wants to encourage production of raw sugar and would provide all necessary support for it.

Other members of the informal group of ministers, set up recently by Prime Minister Manmohan Singh, include Finance Minister P. Chidambaram, Petroleum Minister M. Veerappa Moily and Civil Aviation Minister Ajit Singh.

Pawar said the panel has recommended interest-free loans for five years to help address financial problems of sugar mills.

Besides the interest-free loans, the panel has recommended for other financial assistance also, Pawar said without elaborating.

On mandatory blending of ethanol in gasoline, Pawar said the limit will be increased to 10 percent from the existing 5 percent.

The ministerial panel's recommendations would need to be approved by the cabinet.

The industry body welcomed the panel's recommendations saying it would help sugar mills clear arrears to farmers and sustain production.

“The industry welcomes the initiatives of the central government to help the sugar industry to face the financial crisis it is going through,” said Abinash Verma, director general of the Indian Sugar Mills Association (ISMA).

“It will help the industry clear arrears of farmers and also venture into production of new product, raw sugar to diversify its product mix to grab opportunities whenever they are available,” he said.

“But for a long-term solution, the revenue sharing formula for cane pricing should be implemented to rationalise the cane pricing mechanism and make it more transparent,” Verma added.

Sugar mills have been struggling to sustain operations due to financial difficulties. In fact, private mills in Uttar Pradesh had recently refused to start sugarcane crushing, saying it was not economically viable.

However, most of them have now started operations following government intervention and on hopes of financial help.

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