India keeps sugar export subsidies

India will keep its sugar export subsidies despite complaints to the World Trade Organisation from rival producers Brazil and Australia, though it will tweak how it provides them, four sources directly involved in the matter said on Monday.

India will keep its sugar export subsidies despite complaints to the World Trade Organisation (WTO) from rival producers Brazil and Australia, though it will tweak how it provides them, four sources directly involved in the matter said.

The export subsidies are designed to increase shipments from the world’s second-biggest sugar producer and reduce their brimming inventories. But that could pressure global prices that have only eked out a 2.1% gain in 2019 after plunging more than 20% in 2018.

“The industry needs government support for exports. It will be provided without violating the WTO framework,” said a senior government official involved in the policy making.

Government and industry officials did not say what kind of changes they are planning to make, though they said they were seeking guidance from WTO experts.

Years of bumper cane harvests and record sugar production have hammered Indian sugar prices, making it hard for mills to pay money owed to farmers, who form an influential voting bloc.

To reduce that debt and pare rising inventories, New Delhi said in September it would provide incentives to mills for overseas sugar sales and set an export target of 5-million tons for the 2018/2019 marketing year ending on September 30.

India’s exports surged to 3.3million tons from 620,000 tons a year earlier. That prompted rivals to complain at the WTO, alleging the incentives violate trade rules.

The Brazilian government said on Thursday it had asked the WTO to establish a panel aimed at resolving its dispute over Indian sugar subsidies. Australia and Guatemala also lodged complaints on Thursday.

India has been providing transport subsidies of between 1,000 rupees a ton to 3,000 rupees ($43,78) a ton to sugar mills, depending on the distance to ports. The government has also raised the amount it directly pays to cane growers to 138 rupees a ton in assistance from 55 rupees a year ago.

Sugar mills were requesting that the government provide incentives to export 7-million to 8-million tons of sugar in the next season, up from this season’s target of 5-million tons, said Abinash Verma, director general of the Indian Sugar Mills Association.

Announcing the export policy would help mills in deciding whether to produce raw or white sugar for export at the beginning of the season, said Prakash Naiknavare, MD of the National Federation of Cooperative Sugar Factories.

Indian mills traditionally produce white sugar for local consumption, but they produce raw sugar during years of surplus to help exports.