India is in negotiations with Brazil to resolve a sugar dispute at the World Trade Organization (WTO) and the commerce ministry is coordinating with concerned departments for the same, government sources said.

India is also following a similar process for other complainants of the sugar dispute at the Geneva-based WTO, they said.

In 2019, Brazil, Australia, and Guatemala dragged India into the WTO's dispute settlement mechanism alleging that New Delhi's sugar subsidies to farmers are inconsistent with global trade rules.

The Department of Commerce is coordinating with all the concerned line ministries to arrive at possible alternatives, one of the sources, who is aware of the development, said.

The exercise assumes significance as a WTO dispute settlement panel on December 14, 2021, ruled that India's support measures for the sugar sector are inconsistent with the global trade norms.

In January 2022, India appealed against the panel's ruling at the WTO's appellate body, which is the final authority on such trade disputes.

Brazil is the largest producer and exporter of sugar in the world. India is the world's second-largest sugar producer after Brazil.

Brazil, Australia, and Guatemala, which are members of the WTO, had complained that India's support measures to sugarcane producers exceed the de minimis level of 10 per cent of the total value of sugarcane production, which according to them was inconsistent with the WTO's Agreement on Agriculture.

They had also flagged India's alleged export subsidies, subsidies under the production assistance and buffer stock schemes, and the marketing and transportation scheme.

According to WTO rules, a WTO member or members can file a case in the Geneva-based multilateral body if they feel that a particular trade measure is against the norms of the WTO.

WTO dispute resolution process

Bilateral consultation is the first step to resolve a dispute. If both sides are not able to resolve the matter through consultation, either can approach the establishment of a dispute settlement panel. The panel's ruling or report can be challenged at the World Trade Organization's Appellate Body.

Interestingly, the appellate body of the WTO is not functioning because of differences among member countries to appoint members to this body. Several disputes are already pending with the appellate body. The US has been blocking the appointment of the members.

Increasing bilateral trade between India and Brazil

The bilateral trade between India and Brazil increased to $16.6 billion in 2022-23 as against $12.2 billion in 2021-22. Trade gap is in the favour of India.

India has exported 37.75 lakh tonnes of sugar till March 9 of the 2022-23 ongoing marketing year ending September out of 60 lakh tonnes allowed by the government, trade body All India Sugar Trade Association (AISTA) has said in March. Mills have exported 37,75,684 tonnes of sugar between October 1, 2022, and March 9 of the 2022-23 marketing year.

The sugar marketing year runs from October to September. The government has allowed the export of 60 lakh tonnes for the 2022-23 marketing year. The industry is demanding that the government should increase the export quota.

WTO member countries can resolve disputes outside the dispute settlement mechanism and later inform the multi-lateral body about the same.

Recently, India and the US have agreed to end their six major trade disputes at the WTO.