The government will keep its sugar export subsidies despite complaints to the World Trade Organization (WTO) from rival producers Brazil and Australia, though it will tweak how it provides them, four people 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 this year 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. “We may need to make some changes in the way we provide incentives."
Government and industry officials did not say what kind of changes they are planning to make, though they said they are 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, the Centre said in September it would provide incentives to mills for overseas sugar sales and set an export target of 5 million tonnes for the 2018-19 marketing year ending on 30 September.
India’s exports surged to 3.3 million tonnes from 620,000 tonnes 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 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 a tonne to ₹3,000 a tonne to sugar mills, depending on the distance to ports. The government has also raised the amount it directly pays to cane growers to ₹138 a tonne in assistance from ₹55 a year ago.
On Wednesday, Indian industry and government officials discussed how an incentive can be provided in the next marketing year starting from 1 October without violating WTO rules. “The export policy for the next season could be finalized early next month," said an industry official, who was part of Wednesday’s discussion.
Sugar mills are requesting that the government provide incentives to export 7 million to 8 million tonnes of sugar in the next season, up from this season’s target of 5 million tonnes, said Abinash Verma, director general, Indian Sugar Mills Association.
Indian mills traditionally produce white sugar for local consumption, but they produce raw sugar during years of surplus to help exports.