Sao Paulo: The Brazilian government approved consultations at the World Trade Organization regarding subsidies it says India gives to cane producers and sugar exporters, Brazil’s trade ministry said.

Brazil said it has decided to start a formal action at the WTO after failing to receive enough information from India following letters it sent to the Indian government seeking clarifications on sugar policies.

“The suspicion is that Indian domestic support (to farmers) and its subsidies to sugar exports caused significant impacts in the sugar market in a context of falling prices and decreasing production in the main centers Brazil, China and Thailand," the Brazilian trade ministry said in a written statement late Tuesday.

India is expected to surpass Brazil as the world’s largest sugar producer in the current global sugar crop, with output around 33 million tonnes while Brazil’s production is expected to fall almost 10 million tonnes to below 30 million tonnes.

Brazil said India’s government policy to guarantee a minimum price for cane to farmers has caused production to surge. It says this policy, combined with subsidies to sugar transportation, is allowing the country to ship excess sugar production abroad.

Sugar prices in New York reached a 10-year low in September. Prices have recovered a bit since then, but are still barely covering production costs for most companies.

As a result, Brazilian mills sharply reduced their sugar production in the current season, diverting cane to ethanol instead and leaving sugar equipment idle.

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