India defies Brazil attack to pass sugar subsidy

Indian ministers, at the fourth attempt, passed a subsidy for sugar exports, defying condemnation from Brazilian cane mills, which joined a growing list of critics of New Delhi's agricultural support programmes.

India's Cabinet Committee on Economic Affairs on Wednesday agreed a raw sugar export incentive of 3,333 rupees ($54) per tonne, a compromise deal between the agriculture ministry, which had held out for a slightly higher sum, and a food ministry proposal attempting to stem the risk of stoking food inflation.

The subsidy is aimed at finding a market for the country's large sugar stocks, which entered the 2013-14 crushing season at a hefty 8.8m tonnes.

The sugar industry is of large economic significance for India, the second-ranked producer of the sweetener and the top consumer, with cane growing a key earner for rural communities in many states.

However, the committee's decisions defied an attack from Unica, the Brazilian cane industry group, which became the latest body to raise concerns over India's generous agricultural spending, which has boosted the country's food security and raised it into a large exporter of many crops.

'Punishing rivals'

Unica said it "condemns" the export subsidy, which would add to the cash India already spends subsidising freight and transport costs.

Both types of subsidy "not only distort international markets, but also artificially force down prices, punishing exporters that don't resort to similar practices," the group said.

India's move, while a fillip to domestic producers by "propping up internal prices above global levels", represented a headwind to foreign rivals, which are forced "to reduce their own output and adjust exports in future harvests, or face even deeper losses because of depressed prices", Unica president Elizabeth Farina said.

Unica said that its thinking was in line with World Trade Organization policy, although some other observers believe that India is staying within the rules by subsidising a half-processed product, raw sugar, rather than fully refined white sugar.

Grain concerns

However, governments of Canada, the US and Pakistan have already raised questions to the WTO over India's support programmes for rice, of which the country is the top exporter, and  wheat.

Pakistan questioned the extent of subsidies for non-basmati rice, which accounts for most of India's rice exports.

Canadian officials queried India's cut to $260 a tonne, from $300 a tonne, in the floor price for wheat exports, when this was "lower than the price of the same quality wheat from Canada, and other countries, sold in the range of $270-275 per tonne".

And the US claimed that India was selling wheat for below market cost, once administration and storage costs were added to the $220-a-tonne purchase price from growers.

Indian officials are working on costings to submit to a future WTO meeting.

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