The city industrialists have demanded the state government

Perhaps, the sentence written by you is out of the scope of the GMAT.
As per MGMAT SC and e-GMAT, demand can ONLY take "that", in GMAT. In outer world, it is possible to write sentences in a way that doesn't follows GMAT standard.

I demand to see the person in charge.
I find this a little awkward.
de·mand
/diˈmand/
Noun
An insistent and peremptory request, made as if by right.
Verb
Ask authoritatively or brusquely.
Synonyms
noun. request - claim - requirement - requisition - call - want
verb. require - claim - ask - request - call for - postulate

It would be better to put it like "I wish to see the person in charge"
Keeping in mind that "wish" in no way means subtle. Wish has pretty strong intentions too.

Eaakbari, once you read the Verb tense chapter of MGMAT SC guide (Command subjunctive mood topic) or other equivalent source then you will be lot more clearer on this concept. They have detailed explanations with examples there.

In summay:
 Command subjunctive – used with certain bossy verbs, which tell people to do things
o E.g., The agency demanded that Gary be ready before noon.
 Same form that you would use to command Gary directly
o Be ready before noon, Gary!

Basic rules:
 Bare form of verb – infinitive without the "to"
 Use simple present tense
 No –s on the end for third person singular
 Verb "to be" is always just "be", but never use is, are, or am

Subjunctive construction with “bossy verb”:
Bossy verb + THAT + subject + command subjunctive
 Correct: We propose that the school board disband.
 Wrong: We propose the school board disband. --That is not optional
Command Subjunctive ONLY (indicates desire): Demand, Dictate, Insist, Mandate, Propose, Recommend, Request, Stipulate, and Suggest

[quote="eaakbari"]
The city industrialists have demanded the state government to meet the promises made by chief minister Ashok Chavan.

Any sentence which has a bossy verb such as demand, dictate, instruct, or mandate as its main verb requires a command subjunctive structure in which the other verb is in command subjunctive mood. The structure of such sentence will always be Bossy verb+"that"+subject+ verb in command subjunctive mood. Whenever a verb is in command subjunctive mood it always dictates something.

The above case has a bossy verb "demanded" so the right structure is

The city industrialists "demanded" "that" "the state government" "meet" the promise made by AC.

Verb "meet" in the sentence above is in a command subjunctive mood.

To understand better go through Manhattan SC strategy guide. Search for "Verb tense, mood, and voice".