NEW DELHI: The government's move to extend the export subsidy for sugar until the end of the sugar season in September may increase India's headache at the World Trade Organization. Already, several countries, ranging from Australia to Brazil, have raised questions over the subsidy offered by the government as the payment, increases the competitiveness of Indian sugar in the international markets, and impacts prices. Several countries had demanded that the subsidies should be withdrawn. "India said the policy is designed to encourage diversification away from white sugar to raw sugar and that no intervention payments have been paid yet. India said export subsidies will be notified to the WTO," sources had said. During the meetings India, which had originally launched the scheme for a few months ahead of the general elections, had defended the subsidies, arguing that it was a one-off measures and may not be compliant with WTO rules. Privately, commerce department officials concede that the scheme may be against WTO rules but have played along with their political masters. In fact, there were suggestions that the scheme would be discontinued at the end of the current sugar season. In March, Australia said the Rs 3,300 per tonne incentive payment is the equivalent of 14-16% of the world price. Since India is the third largest exporter of sugar, this threatens to distort trade seriously, Australia said, adding the amount could potentially finance its own exports half way across the Pacific.

June 24, 2014

Source: timesofindia.com