Bangalore: The Karnataka government on Wednesday offered a slew of measures to help the Karnataka Milk Federation and Milk Producers Unions, including extending of interest subsidy.

The government has decided to provide interest subsidy of four per cent towards working capital loan required by KMF and Milk Union, which have been facing financial crisis following fall in prices of Skimmed Milk Powder and butter in the wake of surplus stocks, for making payment to producers, an official release said here.

The sops offered by the government also intended to help 20 lakh farmers who depend on earnings from milk supply and also ensure that KMF and Milk Union pay them dues, it said.

The release said the government would share 50 per cent of the loss due to the distress sale of SMP at a price lower than the production cost from this October one to March 31, 2013.

In the wake of the state extending Rs 2 per litre as subsidy to milk producers in the last two years, the procurement of milk has touched 54 lakh kgs per day. While the KMF sells 40 lakh kgs of milk and products, the remaining surplus of 14 lakh kgs was being converted into SMP and butter.

Due to countrywide surplus of SMP, the KMF is unable to sell its stocks, leading to shortage of working capital for it and milk unions.

The prevailing prices of SMP is much lower than the production cost, the release said.