Dispute action against India’s sugar subsidies initiated by Australia and Brazil at the World Trade Organization (WTO) has evoked huge interest amongst sugar exporting members including Guatemala, Costa Rica, the EU and Thailand who have requested that they be allowed to participate in the official consultations.

India’s subsidies to its sugar producers, both for production and exports, have been targeted by Australia and Brazil in two separate requests for consultations filed at the WTO where they have contended that the sops were disrupting world production and prices of the commodity. In case the consultations fail, the two can opt for a dispute settlement panel to decide on the validity of the subsidies. “Thailand has a substantial trade interest in these consultations. In 2018, Thailand was the world's second largest exporter of sugar with export value of $2.59 billion,” according to the country’s submission to the dispute settlement body.

EU submission

The EU, in its submission to the WTO, pointed out that after the end of the sugar quotas, it had become a net exporter of sugar in the 2017-18 marketing year with exports increasing by 70 per cent to more than 3 million tonnes per year. “With exports to India of sugar increasing more than ten times in a single year in the 2017-18 marketing year compared to the average of the two preceding marketing years, the EU has the potential to become a major supplier to India,” its representation said.

In discussions on the matter held in the agriculture committee prior to the initiation of disputes by Australia and Brazil, India had defended its position by saying that most of its subsidies to sugar producers was in the form of production subsidies that was permissible under the WTO. The subsidies to exporters given for exports was for transportation and marketing purposes which, too, was permitted by the WTO, it had further explained.

Australia and Brazil, in their requests for consultations earlier this month, rejected India’s arguments and said that most subsidies to sugar producers in India violated WTO rules. “…the amount of support to agricultural producers is in excess of India’s product-specific de minimis level of 10 per cent for sugarcane,” Australia said in its submission.

It added that several subsidies such as the state-level export subsidy for sugar, federal-level assistance and export incentives (raw sugar export incentive scheme), and freight assistance were inconsistent with the Agreement on Agriculture as they appeared to be export subsidies.

“India has almost doubled the Fair and Remunerative Price for sugarcane from ₹1391.2 per tonne in 2010-11 to ₹2,750 per tonne in 2018-19….. The total amount that the mills are mandated to export has increased from 2 million tonnes in 2017-18 to 5 million tonnes in 2018-19, leading to substantial pricing pressures on world market prices,” as per Brazil’s submission to the Dispute Settlement Body.

Guatemala and Costa Rica, too, in their submissions requested permission to participate in the consultation as being major exporters of sugar they had interest in the matter.

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