Thursday 6th Aug, 2020

India approves further sugar export subsidies

Queensland’s sugar mills have produced more than two million tonnes of raw sugar this season, according to the Australian Sugar Milling Council (ASMC).
Photo: Shutterstock

The Indian Government has shocked Australia’s sugar industry after approving a $1.3 billion export subsidy of $216 per tonne to help Indian sugar exports reach more than six million tonnes over the next year.

India has produced more sugar than its domestic requirements over eight of the past 10 years. This is in part due to its regulated cane prices that the Australian, Brazilian and Guatemalan Government are challenging in the World Trade Organisation (WTO) as being inconsistent with the WTO’s Market Price Support rules.

Queensland sugar cane grower advocate, Canegrowers, said in a release that India’s high cost sugar producers require generous export subsidies to compete with low-cost exporters like Australia.

Indian raw sugar production is expected to be around 29 to 30.5 million tonnes in 2019/20, down from 33 million tonnes in 2018/19. It is understood that India is currently holding around 14 million tonnes of raw sugar in storage.

Australian Sugar Milling Council CEO, David Pietsch, said he was stunned by this development, just days after the WTO formally established Dispute Panels to investigate the legality of India’s sugar subsidies.

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“India’s government has approved a massive market distortion,” he said.

“The amount of sugar involved dwarfs Australia’s total annual raw sugar exports of 3.6 million tonnes.”

Canegrowers Chairman, Paul Schembri, said the adverse sugar price effects of India’s latest move will be felt around the world.

“This decision by India underlines the vital importance of the WTO process the Australian Government is undertaking with full industry support. We urge those involved to take every opportunity and move as fast as they can to expedite this process,” Schembri said.

“The low value of sugar on the world market is weighing heavily on the mood of the industry and particularly on growers and their future plans.

“Australia is one of the most efficient and lowest-cost producers of raw sugar in the world, but we are struggling to survive this current extended period of below-cost returns.”

Schembri has urged the Indian Government to consider alternative solutions such as long-term storage.

“This would ease the pressure on both India’s domestic price and the world sugar price. It would also be seen as a constructive response to the legitimate concerns raised in the WTO by the Australian, Brazilian and Guatemalan governments,” he said.