The Indian government today (29 August 2019) approved a contentious A$1.3 billion export subsidy of A$216/tonne to help its sugar industry export more than 6 million tonnes over the next year.
“We are stunned by this development, just days after the WTO formally established Dispute Panels to investigate the legality of India’s sugar subsidies,” said David Pietsch, CEO of the Australian Sugar Milling Council.
“India’s government has approved a massive market distortion. The amount of sugar involved dwarfs Australia’s total annual raw sugar exports of 3.6 million tonnes,” he added.
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.
“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,” said Mr Schembri.
“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,” added Mr Pietsch
“Rather than this attempt to offload raw sugar on an already over-supplied world market, we urge the Indian government to consider alternative solutions, including long-term storage within country and a commitment to reform of its domestic subsidy measures that have contributed to the global sugar glut.”
“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.”
“The Indian Government’s flagrant actions will be subject to an exhaustive and lengthy WTO Panel dispute resolution process,” concluded Mr Pietsch.
- India in eight of the past 10 years has produced a quantity of sugar in excess of its domestic requirements primarily because of its regulated cane prices that the governments of Australia, Brazil and Guatemala are challenging in the WTO as being inconsistent with the WTO’s Market Price Support rules.
- India’s high cost sugar producers require generous export subsidies to compete with low-cost exporters like Australia in order to clear their domestic market and generate revenue.
- Indian raw sugar production is expected to be around 29-30.5 million tonnes in 2019/20 – down from a peak of 33 million tonnes in 2018/19.
- India’s domestic raw sugar consumption requirements are approx. 26 to 27.5 million tonnes.
- India is understood to be currently holding over 14 million tonnes of raw sugar in storage.