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Chennai June 3 The Ministry of Commerce expects sugar production in the European Union to decrease 25 per cent by 2009, thanks to April 2005 ruling of WTO Appellate Body against subsidies to European farmers.

"We (the Indian industry) have to decide whether we want to take the opportunity or not," Mr G.K. Pillai, Union Commerce Secretary, told journalists here on Saturday.

Speaking informally to the media on the sidelines of an export award function, Mr Pillai said that anticipated decline in local production in the EU would provide the Indian sugar industry with an excellent export opportunity, one that could be a natural hedge against domestic price fluctuations.

(The EU has about 20 million tonnes of sugar capacity, with France, Germany and Poland accounting for half of it. After the WTO panel, upon a complaint by Australia, Brazil and Thailand, found that the subsidies provided to farmers were trade distorting, the EU began implementing a restructure scheme that would, in effect, close down factories that are not economically viable— the factory owners are to be compensated out of a fund created by a capacity-based levy of cess on all sugar companies.)

Gherkin market

Calling upon the Indian sugar industry to seize the opportunity, Mr Pillai drew a parallel with the capture of the European gherkin market by Karnataka. Today, exports of gherkins from the State (Rs 600 crore) account for about 90 per cent of the European market, he said.

When the cost of production of gherkins in Europe became too high, production shifted — about nine years ago — to Turkey. Turkish farmers later found out that growing tomatoes was more profitable and vacated gherkin production. Farmers in Karnataka seized the opportunity. Mr Pillai was confident that gherkin exports would cross Rs 1,000 crore this year.

GLOBAL WHEAT PRICES MAY SOFTEN

Mr Pillai said that the Ministry expected global wheat prices to soften in the next few months. This is because the Ukraine wheat crop is to be harvested in July-August and the Australian crop in September-October. (It is pertinent to note that some experts have observed that the Australian exports — about 15 million tonnes, which is 15 per cent of the world trade— may be affected because of drought in the country.)

Mr Pillai stressed that India has adequate stocks of wheat, but would like to import "3-5 million tonnes" in order to keep a control on prices.

Wheat production last year was 72.5 million tonnes, 4 million tonnes more than in the previous year. It is expected that procurement will fetch 11.5 million tonnes, which along with the opening stock of 4.5 million tonnes, would give a buffer of 16million tonnes, equivalent to 16 months' consumption.

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