A World Trade Organisation (WTO) panel has ruled against India’s sugar export subsidy and domestic support to sugarcane gowers in a dispute filed by Australia, Brazil and Guatemala. India has said that it will appeal against the verdict.

There will be no impact of the panel’s findings on any of India’s existing and ongoing policy measures in the sugar sector, according to an official release issued by the Commerce Department on Tuesday.

“The panel issued its report on December 14, 2021 in which it has made certain erroneous findings about our schemes to support sugarcane producers and exports. The findings of the panel are completely unacceptable to India. The panel’s findings are unreasoned and not supported by the WTO rules. The panel has also evaded key issues which it was obliged to determine. Similarly, the panel’s findings on alleged export subsidies undermines logic and rationale," the statement said.

Australia, Brazil and Guatemala had challenged some of India’s policy measures in the sugar sector at the WTO dispute panel in 2019. The countries complained that domestic support provided by India to sugarcane producers was in excess of the limit allowed by the WTO and India provides prohibited export subsidies to sugar mills.

“India believes that its measures are consistent with its obligations under the WTO agreements,” the release said.

Violation of AoA

In its report, the panel observed that for five consecutive sugar seasons, from 2014-15 to 2018-19, India provided non-exempt product-specific domestic support to sugarcane producers in excess of the permitted level of 10 per cent of the total value of sugarcane production. As a result, the panel found that India was acting inconsistently with its obligations under the Agreement on Agriculture (AoA).

The panel also found that the challenged schemes are export subsidies within the meaning of Article 9.1(a) of the Agreement on Agriculture. In addition in the complaints brought by Australia and Guatemala, the panel found that, under the challenged schemes (including the scheme challenged only by Australia), India has provided subsidies contingent upon export performance, inconsistent with the SCM Agreement.

The panel recommended that India bring the measures at issue into conformity with the WTO agreements.

The panel report shall be adopted by the WTO’s Dispute Settlement Body (DSB) within 20 to 60 days of circulation, unless the DSB decides by consensus not to adopt it or either party notifies its decision to appeal. Since India plans to appeal, this is likely to be a along drawn dispute.

The WTO ruling may not have any impact on sugar exports this season (October 2021-September 2022) as the Indian government is not extending any assistance for shipments. This is because global sugar prices are ruling higher on lower production and supply woes. Last season, India exported a record 7.1 million tonnes of sugar. This season, sugar shipments are expected to top 6 million tonnes.

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