NEW DELHI – The food ministry is likely to soon seek Cabinet approval for subsidising export of up to 6 mln tn of sugar in 2019-20 (Oct-Sep) to help clear the surplus in the domestic market and support domestic prices, three sources close to the development said.
The ministry is likely to propose a subsidy of 10.50-11.0 rupees per kg on export of sugar that is within the ambit of World Trade Organization rules. The subsidy would cover the cost of loading and transporting sugar from warehouse to port, loading the sugar in ships, ocean freight, insurance and handling charges, the sources said.
In the current sugar season that ends in September, the government had given a similar quantum of subsidy for export of sugar. One part of the subsidy was given on cane crushed by mills that export of sugar, and the other was given on transporting sugar from mills to the nearest port.
The subsidies given by India this year on export of sugar were challenged by Brazil, Australia and Guatemala in the World Trade Organization, on the grounds that they distorted the global market. The European Union, Australia, New Zealand, Brazil, Canada, and Russia too have raised questions on India's sugar policies at the WTO Committee on Agriculture.
WTO is likely to take a call on Thursday on forming a dispute panel to look into complaints against India's sugar subsidies.
For the next season, the food ministry had been looking at ways to give subsidies on export of sugar that were within the WTO framework.
According to WTO's Agreement on Agriculture, India can give subsidies on transportation, freight, marketing, handling and processing of sugar till 2023.
Subsidising exports is the only way by which Indian sugar will make way into global markets.
With carryover stock from this season seen at about 14.5 mln tn, total supplies in 2019-20 are pegged at 42.7 mln tn, way higher than the estimated consumption of 25.5-26.0 mln tn.
The subsidy the government is considering this year is well short of the 13 rupees a kg the industry had sought in the wake of a fall in international sugar prices.
The October contract of raw sugar on the Intercontinental Exchange--a benchmark for global sugar prices--hit a 10-month low of 11.27 cents a pound last week.
If international sugar prices remain at 11 cents a pound or below, exports will be viable only if the subsidy is 12 rupees a kg, or higher, according to industry estimates.