Greencore could receive hundreds of millions in compensation for closing its remaining sugar factory in Mallow, under reforms being considered by the European Commission.

Martin Heraghty, assistant secretary general of the Department of Agriculture and Food, said yesterday that under current EU reform proposals a company closing down would have to renounce the quota attached to the factory and it would be paid for that. Greencore processes the entire Irish beet quota of 1.4 million tonnes (1.5 million tons) and could receive between €370 and €730 per tonne of quota renounced.

Mr Heraghty did not give a figure for the amount Greencore would receive, but it is estimated that this could exceed €400 million.

He told the Oireachtas Joint Committee on Agriculture and Food yesterday that the commission's legal advice on who owned the quota was that it was a market control mechanism, and thus was not owned by anyone.

"This advice has been confirmed by the Attorney General to the department," he said.

He also told the committee that the department had not been approached by Greencore to see if it could import sugar cane into the country to process it here.

Mr Heraghty said that from Ireland's perspective, proposals to cut the support price for sugar by 39 per cent per tonne and cut the minimum price for sugar beet by 42 per cent, was unacceptable.

He said that despite a deepening in the cuts being proposed from the original document, compensation for farmers remained at 60 per cent of the drop in the support price and would be paid in the Single Payment Scheme.

He said Ireland's proposed financial envelope for sugar was €11 million in 2006-2007 and €18 million in 2007-2008.

Mr Heraghty added that the level of price cuts proposed were such as to make sugar beet production in a number of member states, including Ireland, uneconomic.

He said that the restructuring scheme for the closure of a sugar factory would have huge implications for sugar beet growers and this was not sufficiently recognised.