Buckling under pressure from countries such as Australia and Brazil at the World Trade Organisation (WTO), India is considering discontinuing direct export subsidies for raw sugar which are banned under the multilateral trade rules. It may instead give incentives that are compatible with the regime.

A government official told BusinessLine : “The mandate in the government is to move away from export subsidies. The Department of Food and Public Distribution is in consultation with the Commerce Ministry to explore other options for helping the sugar industry. The message is clear that export subsidies cannot be the answer to the problems facing the industry.” The subsidy of ₹4,000 a tonne for export of raw sugar, which expired on September 30, has not been extended, much to the disappointment of sugar millers. Millers say that without incentives from the government it would not be possible to export the 4 million tonnes (mt) of sugar that the government has mandated for the current sugar year (October-September 2015-16) as world prices are ruling much below domestic prices.

Need for proper schemes The subsidies that the WTO allows for exported sugar are either for transportation or marketing. “If subsidies are to be extended for transportation and marketing, proper schemes have to be devised so that these can’t be questioned,” the official said.

The Agriculture Ministry has been announcing subsidies for export of raw sugar for the past two years to help ease the sugar glut in the country and enable millers pay the mounting dues to cane farmers.

However, these subsidies have increasingly come under the scanner of the WTO, with several members claiming that these could distort global prices. New Delhi has got away so far by claiming that it has not disbursed the subsidies to exporters yet, but it faces the danger of being dragged to dispute at the WTO if it is established that such sops are being doled out.

At the recent meeting of the Committee on Agriculture at the WTO, Australia pointed out that if the mandated 4 million tonnes of raw sugar takes place at a subsidised price, it could have an effect on world prices as the amount was equivalent to almost a tenth of world trade.

Through mandatory sugar exports, India aims to reduce the glut in the domestic market and help millers pay cane arrears to farmers, which stood at ₹14,000 crore at the end of August.

According to industry estimates, because of higher supplies, there would be a carryover stock of about 10.2 mt in the new season. With sugar output in 2015-16 expected at 28 mt, the total supply next season is pegged at 38.2 mt.

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