The World Trade organization (WTO) has not accepted the view of the Indian government on the raw sugar export subsidy whereby it had stated that the export subsidy is aimed at cane millers and farmers and not exporters.
According to members of the WTO who have raised the objection on the scheme, such subsidies directly or indirectly benefit the exporters as it helps them in paying their dues owed to the farmers.
The exporters are sugar producers in the domestic market who get this assistance from the government for their meeting their liabilities, that is payment to the cane farmers. To that extent they get the cushion on their cost.
In view of these developments, the ministry of food which manages the commodity has decided to review the entire scheme in the light of these objections.
Then the scheme will be sent to the cabinet for the final decision whether or not to continue with the scheme and if continued then in what form.
To this effect, sources said, some relaxations may be given to the sugar industry through some other scheme for their domestic operations, if this scheme gets discontinued. However official sources said that the scheme will run its full course till end of September 2014. The review will happen for its next tenure.
The food ministry had explained that the subsidy is aimed towards paying sugar cane arrears to the cane millers and help the industry for product diversification.
Various countries that have objected to this scheme under the aegis of WTO are Brazil, Columbia, Australia and the European Union (EU). Brazil is the global leader in sugar production.
According to official sources, usually in India there is no demand or consumption of raw sugar and the entire cane is processed for sugar or jaggery or mollases etc.
On the other hand, there is surplus stock of sugar in the country which is why the sugarcane farmers are not in the position to get proper remuneration as the cost of production is higher than the market price.
For the current season there will be a carryover stock of around 55-65 lakh tones even with 25 lakh tonne of sugar exported in the form of raw sugar.
Therefore a conscious decision was taken by the last government to divert the domestic production to the export market where the demand is for raw sugar and not processed sugar, said sources. The subsidy thus is intended for helping the millers/ farmers to divert manufacturing of sugar to raw sugar.
Last year, the Cabinet Committee on Economic Affairs (CCEA) has also approved Rs 6,600 crore interest-free loans to the sugar industry with interest subvention of 12% to be borne by the Sugar Development Fund.