The increase in export subsidy for raw sugar announced by the Government for the current year has come under the scanner of the World Trade Organisation (WTO) with members such as Colombia, Australia and the EU crying foul.

Members, who have been warning that sugar export subsidies go against India’s WTO commitments since last year, have stepped up pressure and asked for details of pay-outs in 2014.

“The matter will come up for discussion at the WTO’s Committee of Agriculture meeting later this week,” an official at the WTO told BusinessLine.

Late last month, the government raised the export subsidy for raw sugar from ₹3,300 a tonne (announced last February for 2014) to ₹4,000 for 2015 season for up to 1.4 million tonnes (mt) of sugar. The subsidy for 2014 had lapsed last September.

Interestingly, India had informed the WTO last November that although it had approved export subsidies for sugar in February, it had not paid any subsidies till that time.

Challenging the Centre’s claim, Australia said that if indeed the sugar export subsidy programme was unfunded and no incentives were being paid, India should explain the rationale behind the bi-monthly review, the adjusted rates and continuation of the programme.

“If subsidy payments have been made… can India provide the total value of export subsidy budgetary outlays as well as the volume and value of raw sugar exports that have been subject to incentive payments?” the Australian representative to the WTO stated in a representation prior to the CoA meeting.

Colombia said it was worried about media reports on the increase in export subsidy for sugar in India as it could distort world prices. “Colombia is concerned about the impact that these statements are having on the world sugar market, which is exacerbated by the fact that India is the world's third largest exporter of sugar,” the country’s representation stated.

The idea behind the export subsidies is to help sugar millers reduce their rising domestic stocks and pay sugarcane farmers their dues.

According to estimates made by the Indian Sugar Mills Association (ISMA) earlier this year, cane arrears across the country could cross last year’s peak of over ₹13,000 crore.

The EU, in its representation, said that India should explain how the re-activation of sugar export subsidies, complies with its export subsidy commitments.

According to industry estimates, mills are expected to produce a record 26 mt of sugar in the 2014-15 season in addition to a carryover stock of 7.5 mt.

Domestic sugar consumption is pegged at between 24.7 and 24.8 mt.

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