While India’s sugar exports have been surging, several members of the World Trade Organisation (WTO) - including the European Union (EU), Australia, Brazil and Colombia - have demanded that the country remove the subsidies that were granted to Indian sugar exports in February 2014.
At a recent WTO meeting, the aforementioned nations asked India about the new policy that involves the payments of incentives to Indian sugar exporters. The incentive paid to them - Rs 3,300 per tonne - has helped Indian exporters find newer and cheaper markets overseas.
The availability of a substantial amount of water has helped farmers increase the production of sugar. The dry climate in Brazil, the world’s largest producer of sugar, also helped India grab the market.
“In addition to the possibility that India might be violating a commitment, some of these countries said they were concerned that the subsidies would distort world markets by depressing prices, hurting producers in their countries,” a WTO official stated.
“The first priority of WTO is to try to settle issues through discussions in the committees,” he added. Along with the facts and figures, some of the countries asked what the legal basis under the WTO was for the export subsidies.
Some of them pointed out that India had agreed not to subsidise exports. India said that the policy was designed to encourage diversification away from white sugar to raw sugar, that no intervention payments had been paid yet, and that the export subsidies would be notified to the WTO.
Australia said the Rs 3,300 per tonne incentive payment was the equivalent of 14–16 per cent of the global price. “Since India is the third largest exporter of sugar, this threatens to seriously distort trade,” the country stated, adding that it asked India to remove export subsidies immediately.
It added that the amount envisaged could potentially finance all its own exports halfway across the Pacific Ocean. The Agriculture Agreement allowed developing countries to subsidise marketing costs and internal transportation costs during the agreement’s implementation period.
Brazil asked how India could justify the subsidies since there has been no consensus to extend these special provisions for developing countries.
Responding to similar questions raised in the past, India had argued that developing countries were still allowed to use the special provision, because the 2005 Hong Kong Ministerial Declaration stated that developing countries would continue to benefit from the provisions of the Agreement on Agriculture for five years after the end-date for elimination of all forms of export subsidies, adding that export subsidies had not been eliminated yet.
Paraguay, Thailand, El Salvador, Canada, the United States, Pakistan and New Zealand also shared the same concern about the subsidised exporting of sugar from the country.
