Nov. 10 (Bloomberg) -- Sugar mills in India’s biggest cane- growing state may begin crushing this week after the Agriculture Minister asked them to pay farmers a “proper price,” seeking to end a tariff dispute that threatened to delay supplies.

“I have told mills not to create a situation where farmers will be forced to switch to other crops,” Minister Sharad Pawar told reporters after meeting with the Uttar Pradesh Sugar Mills Association in New Delhi today.

Mills in Uttar Pradesh, also India’s second-biggest sugar producer, have been lying idle because of the farmers’ demand for prices that are higher that those set by the state and the federal government. A shortage turned the country into a net importer for the first time since 2006, and pushed up global prices to a 28-year high in September.

“We are trying to open the mills in Uttar Pradesh as early as possible to increase supplies,” Pawar said. “Availability should increase.”

Mills have agreed to pay growers about 180 rupees per 100 kilograms, Press Trust of India reported today, citing no one.

The tariff is higher than the uniform nationwide price of 129.84 rupees announced by the government last month, and the 165 rupees fixed by the Uttar Pradesh state for general grade cane and 170 rupees for the early-maturing variety.

“Farmers have every right to get a proper price. Cane prices must reflect sugar prices,” Pawar said.

Wholesale Market

Sugar prices at Vashi in Mumbai, India’s biggest wholesale market for the commodity, fell for a second day, losing about 1 percent to 3,427.5 rupees per 100 kilograms. Prices have surged 80 percent this year. In New York, futures for March delivery rose 0.8 percent to 22.59 cents a pound.

“We are not expecting any problem and there will be normal operation of mills,” said C.B. Patodia, president of the Uttar Pradesh Sugar Mills Association, in an interview yesterday.

Factories in western part of the state will start crushing between Nov. 12 and Nov. 15, and those in the central region will begin Nov. 15 to Nov. 20, he said.

Mills in the western and southern Indian states have begun crushing cane, Pawar said.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net;

Last Updated: November 10, 2009 06:48 EST