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Australia questions India’s mandatory sugar export quota

NEW DELHI, SEPTEMBER 30: Australia has questioned India’s decision to make it mandatory for sugar millers to export 5 million tonnes during the 2015-16 sugar season (October-September). “Australia has (at a WTO meet) indicated that if India intends to carry out the mandated exports at a subsidized price, it has the potential to distort world trade in the commodity,” an official who attended a recent meeting of the WTO’s committee on agriculture, told Business Line.

“Australia wanted to know what policy India intends to adopt on the export quota for sugar. It says the decision could have an effect on world prices since 4 million tonnes is equal to about 8 per cent of the world trade in sugar,” the official said.

Australia, the EU, Colombia and Brazil also quizzed India on the increased rate of its export subsidy (announced in February) for raw sugar for the ongoing sugar year and asked it to respect the Bali ministerial declaration on export competition by exercising restraint.

International dispute

“The Food Ministry has to be very careful on how it supports the sugar industry. There is the risk of being dragged into dispute if it can be proved that certain subsidies are affecting world prices and distorting global trade,” a Commerce Ministry official said.

Under WTO rules, India is allowed to provide subsidies to exporters for internal transportation, external transportation and marketing only.

At the WTO’s Bali ministerial meeting in December 2013, all countries agreed to start reducing their export subsidies and move towards their gradual elimination. However, New Delhi has been subsidizing limited quantities of raw sugar exports.

India has not yet announced export subsidies for the 2015-16 sugar season, but the Food Ministry is reportedly working on it. Else, sugar exports would not be feasible because of higher domestic prices compared to global prices. The export subsidy of ₹4,000 per tonne, announced in February for the 2014-15 season, for up to 1.4 million tonnes (mt) of sugar, lapses on September 30.

Through mandatory sugar exports, India aims to reduce glut in the domestic market and help millers pay cane arrears to farmers, which stood at ₹14,000 crore at the end of August.

New Delhi seeks time

At the WTO meet, New Delhi asked for more time to respond to Australia’s query, as it was submitted after the deadline for questions.

The Indian Sugar Mills Association estimates a carryover stock of about 10.2 mt from this season to the next because of supply outstripping demand. With sugar output in 2015-16 expected at 28 mt, the total supply next season is pegged at 38.2 mt.

Domestic demand is estimated at 25.2 mt, which could leave a surplus of 13 mt next season without exports.