Michael Moynihan (Cork North West, Fianna Fail)
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I appreciate the opportunity to raise this important issue in this week, which sees the closure of the Mallow sugar factory for the last time. It is a very sad day for north Cork and the entire region. While the Mallow sugar factory is synonymous with the town of Mallow, many of the people who have been working for generations since the foundation of the sugar factory in the 1930s have come from my constituency, particularly from what we would call western Duhallow. Part-time workers have worked there seasonally, particularly in the winter when farm work is quiet. That work supplemented their incomes enormously.

What are the plans for the allocation of the compensation that was negotiated at EU level in November when the sugar regime was reformed, which ultimately led to the demise of Irish sugar? We will have considerable difficulties in the future. On the one hand the agricultural land used for the production of sugar beet will now be brought into the main stream for the production of cereals etc., which will obviously lead to a glut in the market. The budget provided funds to give an incentive to the production of green energy, biofuels etc. What discussion has the Minister had with Greencore on the production of biofuels on the site in Mallow? As the Acting Chairman will know, the Mallow sugar factory is probably one of the best industrial sites in the country. It is supplied by an extensive road and rail network. Very few sites have such advantages. We need to use all the State agencies to ensure that a viable alternative industry is put in place.

I know discussions on compensation are taking place. I would like the Minister of State to outline to the House the status of the discussions. In summary I have three questions. What, if any, discussion has the Minister had with Greencore on the future of the sugar factory in Mallow? What, if any, discussions have taken place on the production of biofuels? What is the status of compensation? I thank the Ceann Comhairle for allowing me to raise this important issue not only for east Cork, but also for my area in north-west Cork.

Mary Wallace (Meath, Fianna Fail)
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The compensation package negotiated in the context of reform of the EU sugar regime is worth more than €310 million to Irish stakeholders. It will be drawn down in accordance with the regulations governing the new EU sugar regime, which comes into effect from 1 July 2006. There are three elements to the compensation package.

The first element is the compensation to beet growers of up to 64% of the reduction in the minimum price for beet. This compensation, which will be incorporated in the existing single payment scheme and will be payable from 2006, is worth approximately €123 million to Irish beet growers over the next seven years. The amount of the payment will be calculated on the basis of the average of the farmers' contracted quantities with Irish Sugar Limited during a three years reference period, consisting of the 2001, 2002 and 2004 marketing years.

However, it is possible for farmers to have their average based on one or two years if they submit a successful application to have the average contracted quantity established on the grounds of force majeure. It is also possible for farmers who commenced farming during the reference period to have their average based on one or two years. It will, therefore, not be possible to establish the rate of payment per tonne until my Department has processed all applications under these measures.

The second element of the compensation package is the restructuring fund covering the economic, social and environmental costs of restructuring the sugar industry, including factory closure and renunciation of quota. In Ireland's case, this would be worth up to €145 million. The fund is subject to the submission of a detailed restructuring plan for the industry following consultations between the processor and the beet growers.

The reform agreement provides that at least 10% of the restructuring fund shall be reserved for sugar beet growers and machinery contractors. That proportion may be increased by member states after consultation with interested parties, provided that an economically sound balance between the elements of the restructuring plan is ensured.

Where restructuring takes place in the first year of the new regime, an application for restructuring aid must be made by 31 July 2006 following consultations between the processor and the beet growers. This application must include a detailed restructuring plan for the industry. A decision on the granting of the aid must then be made by the member state by 30 September 2006. Where aid is awarded in respect of restructuring in the first year, payment will be made in two instalments, the first instalment of 40% in June 2007 and the second instalment of 60% in February 2008. Depending on the financial resources available the Commission may decide to split the second instalment into two payments.

Payments of restructuring aid to growers will be based on beet deliveries in the relevant period but pending a decision on the percentage of the aid to be reserved for growers it is not possible to calculate payments per tonne of beet delivered. The Commission is working on detailed rules for the implementation of the restructuring scheme and it is anticipated that the relevant Commission regulation will be adopted later this month. A decision on the percentage will be made in due course following the adoption of this regulation and after consultation with the relevant interested parties, and payment arrangements will then be announced.

The third element of the package is the diversification aid. The reform agreement provides for the introduction of aid for diversification measures where sugar beet production completely ceases. This aid, worth almost €44 million in the case of Ireland, would be drawn down in the framework of a national restructuring programme to be elaborated in due course when the Commission's implementing regulation has been adopted.

I understand Deputy Michael Moynihan's concerns on behalf of his constituents and those who are directly involved in the Mallow sugar factory and I hope that the information provided this evening will be of assistance to him.