India to keep export subsidies for sugar

India will maintain its export subsidies for sugar for the next harvest, despite complaints from competing producers, Brazil and Australia, to the World Trade Organization (WTO).

The objectives with the export subsidies are to increase shipments of the world’s second-largest sugar producer and reduce its stocks. But that may put pressure on global product prices, which have only made a 2.1% gain this year, after having fallen more than 20% in 2018.

“The industry needs support from the government for exports. It will be provided without violating the structure of the WTO”, said a senior government official involved in policymaking. “Maybe we need to make some changes in how we provide incentives.”

Years of plentiful cane harvest and record sugar production have hurt Indian product prices, making it difficult for mills to pay the money owed to farmers.

To reduce this debt and the storages, the Indian government has promised to provide incentives for sugar mills abroad and has set an export target of 5m tons for the 2018/19 trading year, ending Sept. 30.

With the incentives, India’s exports rose to 3.3m tons from 620,000 tons in the previous year. This has led competitors to complain to the WTO, claiming that the incentives violate the rules of trade.

India has provided transportation subsidies of 1,000 rupees (US$14.59) to 3,000 rupees per ton for sugar mills, depending on the distance to the ports. The government has also increased the amount it pays directly to sugarcane producers to 138 rupees per ton. A year ago, this figure was 55 rupees.

For the next crop, which starts being marketed from October 1, industry and government representatives in India are discussing how to implement an incentive without violating WTO rules.

According to Abinash Verma, general director of the Indian Sugar Mill Association (ISMA), the mills are asking the government to provide incentives to export 7 to 8m tons of sugar next season, above the target of 5m tons.

India may start the new season with inventories of more than 14.7m tons and could produce another 28.2m ton in the season, against local demand of about 26m tons, according to ISMA estimates.

Source: Reuters

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