President Hugo Chávez has ordered the military to seize control of Venezuela's rice mills, in his first major broadside against the private sector since a decisive referendum win boosted his power two weeks ago.

The fiery socialist leader announced the move after accusing private producers of "mocking" the Venezuelan people by hoarding rice to evade government-imposed price caps, causing food shortages.

"I have ordered the intervention starting right now in all those sectors of agro-industry, intervention by the revolutionary government," he said during a speech to commemorate the 20th anniversary of deadly riots over high food prices.

Mr Chávez did not say how long the measure would last but warned companies that if they did not comply with output demands they would be permanently seized by the state.

"This government is here to protect the people, not the bourgeoisie or the rich," Mr Chávez said. "I don't have any problem expropriating. And I'll pay them with bonds, too. Don't think I'll pay them with hard cash."

Eleven Venezuelan and foreign firms are thought to be affected, including Polar, the largest food company in the South American nation, whose plant in Guarico state was taken over by troops yesterday.

Other major rice producers include US food giant Cargill, which has 2,000 employees in 22 locations including the Santa Ana Rice Plant in Portuguesa state.

Ministers appeared at odds over the extent of the takeover today. Elias Jaua, the Agriculture Minister, said the troop occupation was just the "first measure" while the Food Minister Felix Osorio suggested the move could be reversed if plants complied with production demands.

William Contreras, Minister for Light and Commercial Industry, indicated to state news agency ABN that the government would take control of all businesses involved in the production, packing and distribution of basic foodstuffs to ensure food sovereignty.

Empresas Polar, a family-owned firm, has long been eyed for expopriation by Mr Chávez. A year ago he described the company as a "clear example" of the kind of business that is ripe for takeover.

Last week, Venezuela's consumer protection agency suspended operations at Polar's Primor-brand rice plant in the west of the country, claiming it had been operating at less than 50 per cent capacity in violation of federal regulations. It accused Empresas Polar of hoarding up to 18,000 tonnes of rice at the plant and accused it of selling mostly rice enriched with colours and artificial flavours to evade price caps which only apply to white rice.

Guillermo Bolinaga, Polar's legal director, vehemently denied allegations of market manipulation. However El Nacional, an opposition newspaper, reported that 16,000 tonnes of rice at the plant were seized during a government raid on Friday.

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