The short-term restructuring plan would involve solving current liquidity problems so that the cash strapped industry can move on, Phisit Pakkasem, chairman of the Thai Sugar Manufacturing Association told Reuters in an interview.

But in the longer run, Thailand needs to improve, above all, its farm management and overall productivity as well as deregulate the industry in order to stay competitive, he said.

The association has commissioned the Thailand Development Research Institute, an economic think-tank, to come up with a comprehensive study and strategic plan for the sugar industry. The report is expected to be completed in eight months.

The study will focus on three major areas -- farm management which is the top priority of the study, mills efficiency, incentives and thestructuring of the industry, he said.

After the study is complete, the association will hold a national seminar on the sugar cane industry and seek government support on the policy front, he said.

"This will be the most comprehensive restructuring yet of the sugar industry. If we don't shape up, we will be very soon out of the competitive circle," he said.

"Our mills are okay. The problem we have is in raw materials. The bottom line is you must make sure that the return on land is attractive enough for planters to continue to grow sugar cane, otherwise the industry will have problems securing raw materials and that will affect cost and pricing," he said.

"In the past, any restructuring moved slowly because it got caught in bureaucracy. There are three ministries that look after the industry and they all sing different tunes. I have to go to the top to get things done. The government is interested in our proposal," he said.

Thailand's sugar cane crops peaked in 1995/96 season when output reached57.46 million tonnes before tapering off. The country has been hit by a severe sugar cane supply problem in the last and the upcoming season.

Cane in the 1997/98 season was hit by El Nino-linked drought and production dropped sharply to 42.20 million tonnes from 56.24 million tonnes a year earlier.

Although rainfall has improved tremendously this year, sugar cane production is not expected to improve over last year because of liquidity woes as a result of the country's worst economic crisis.

Officials estimate that the cane crop for the 1998/99 crushing season (November-May) will be around 40 million tonnes but industry sources said it could be higher at 45 million tonnes which is still low compared to the output between the 1994/1995 and the 1996/1997 seasons.

Problems have been exacerbated by sliding world sugar prices which cause planters, who live on a profit sharing scheme, to suffer low returns. The industry is concerned that if these planters switch to other more lucrative crops or businesses,the whole industry will be in trouble.

"This is a good time to clean our house...to restructure. If we are more productive and competitive, and we have a very good potential to be, we can withstand the market turbulence better. Australia is a shining example," he said.

Although Thailand is one of the top world sugar exporters, it has relatively poor farm management. Its sugar cane, which relies almost entirely on rain, has low yields.

According to figures from LMC International, the average of Thai sugar cane yield between the year 1990/91-1996/97 was around 50 tonnes per hectare compared with 75 tonnes in Australia and almost 70 tonnes in India.

The average sucrose content during the same period was also relatively low compared to that in competitor countries like Australia and Brazil, the LMC report said.

Phisit said sugar cane planters needed help on irrigation and development of new strains as well as other new farm technology which he said could be developed locally.

On deregulation, Phisitsaid some regulations should be eased to allow the sugar price to reflect real market demand and supply factors.

One of the regulations which should be done away with was the fixing of domestic sugar prices, he added.

Thailand has fixed the local sugar prices at the same rate for the past 17 years. Sugar planters who received their revenue through a profit sharing system complained that the fixed price had affected their revenue.

"We must stop thinking of sugar cane as a special commodity and look at it as if it were a regular commodity. Let the market determine the prices," said Phisit, a respected technocrat who has in the past been involved in a number of key National policies.