India ready to fight Brazil’s attack on sugarcane subsidies at WTO: Official
Hindustan Times
Zia Haq
In a dispute, India has been accused of pursuing a policy to
guarantee a high minimum price, known as fair and minimum price or FRP,
for Indian cane-growers that has led production to spike. Along with
this, Brazil flagged subsidies for sugar export. India has a “strong case” to fend off an attack on its price policy
for some 55 million sugarcane farmers of the country at the World Trade
Organisation by Brazil’s far-right president Jair Bolsonaro, a senior
government official said on Thursday.
“We will protect sugarcane
subsidies at all costs because the sector needs government support. We
are confident,” the official with knowledge of the matter said, after
the government recently finished reviewing the matter. A panel of top
WTO consultants aided the government in reviewing the sugarcane trade
regime to avoid violating any WTO clause, he said.
Brazil is the
world’s largest sugarcane producer, while India occupies the second
spot. Brazil fears Indian sugar exports could undercut Brazil’s and
global prices. Guatemala and Australia are other countries to raise
similar complaints of India’s price policy triggering an oversupply. A
key reason why Jair Bolsonaro won last year’s presidential election in
Brazil is that he promised to get the economy out of a four-year slump.
In
a dispute, India has been accused of pursuing a policy to guarantee a
high minimum price, known as fair and minimum price or FRP, for Indian
cane-growers that has led production to spike. Along with this, Brazil
flagged subsidies for sugar export. In its complaint, the Brazil trade ministry said “suspicion is that
Indian domestic support (to farmers) and its subsidies to sugar exports
caused significant impacts in the sugar market in a context of falling
prices and decreasing production in the main centers Brazil, China and
Thailand”.
In October, pursuant to the complaint, the WTO issued a
press statement notifying an adjudicatory dispute settlement body to
discuss the complaint “India – Measures Concerning Sugar and Sugarcane”. Under
the WTO rules (Article 6 of the Agreement on Agriculture), India is
permitted to offer a “product-specific AMS (Aggregate Measurement of
Support) for sugarcane up to 10% of the total value of production of
cane. This also generally applies to subsidies across crops, which
essentially states that all subsidies to agriculture cannot exceed 10%
of their production value.
“A panel of WTO experts consulted by the government has advised us
certain measures. We are confident of not falling foul of any WTO
provision. The subsidies will continue,” a second official said, without
elaborating. India’s sugar-support programmes are critical for millions
of low-income farmers, the official added. India offers a
federally fixed guaranteed price called “fair and remunerative price” on
cane to be paid by mills at Rs 261.25 a quintal (100 kg) for a cane
recovery rate of 9.5%. The recovery rate refers to how much sugar is
extractable from a given quantity of cane, which varies across states.
The FRP is Rs 275 a quintal for 10% recovery rate.
Many states,
such as Uttar Pradesh, Haryana and Punjab, also offer an additional
bonus called state advised price. This means farmers can get up to Rs
315 a quintal in states such as UP. Kavita Kuruganthi of the
Alliance for Sustainable & Holistic Agriculture said nearly 80% of
India’s agricultural produce is under some threat at the WTO. “From
a farmer union perspective, whenever there is a new threat to India at
the WTO, whether it is our food-stock piling, or when our public
distribution system is being threatened, this kind of defensive approach
by the government is inadequate,” Kuruganthi said.
“What we are
pointing out is the unfair rigged rules, as we are calling them, at the
WTO. Other countries can challenge our meagre support to farmers but the
ones challenging us give far more subsidies. So, we need a review of
the entire WTO regime,” she said. India’s main argument is that
WTO rules, while capping subsidies at 10% of the total value of
production, don’t allow inflation to be factored in because the base
year for calculation of price levels is 1986-87.
India’s sugar
output rose from 20.3 million tonnes in 2016-17 to 32.9 million tonnes
in 2018-19. This caused the 2019-20 sugar season to open with record
reserve stocks of 14.2 million tonnes. India’s share in global sugar
exports is 5-6% while Brazil’s share is 34%. In August, the
Cabinet okayed an export policy for surplus stocks of the sweetener. The
export policy for the 2019-20 sugar season involves a subsidy of Rs
10,448 per tonne to sugar mills. Of this around Rs 6,268 crore will be
transferred directly to the farmers.
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