Thursday, March 12, 2015




It is very odd and weak defence with which GOI (Government of India) has responded to in WTO-- that though subsidy for raw sugar export Rs3300/mt or $54/mt for marketing year 2013-14 (October-September) is authorised, yet it is not disbursed, and therefore no subsidy given. The millers have shipped out about a million tons of raw sugar by discounting their price in the international market. The effect of this subsidy has already been transmitted in the overseas market. Is it not the case of the millers to lodge interest claim on the Government?

The justification and argument that subsidy for about one million tons export-- Rs 330 crores or about $54 million-- will enable industry in wiping out cane arrears of more than Rs 14000  crores ($2.3 billion) is puerile. 

 GOI has to be logical about its rationale of assisting the Industry with such subvention, than to question the common sense of the sugar trade worldwide and the WTO. Either the GOI should have the courage of refusing subvention which in any case defies WTO or if it has gone ahead with this defiance, the commitment should be serviced with sense of full responsibility and diligence. 

Now other issues—is it right to delay the disbursement of the agreed amount? Is that the ease of doing business or easing the business out of the business?  Recent media reports suggest that amount has been approved for disbursement commencing 15th March 2015.  But going by the track record of sugar directorate, it will examine the export documentation critically and may detect discrepancies to further defer payments though export proceeds may have been fully realized.

The recent decision (link which enhances the subsidy from Rs 3300 to Rs 4000pmt ($64) in marketing year 2014-15 is yet another endorsement of ignoring WTO regime to help the sugar trade in national interest. The cumbersome conditions attached to this subvention will be nightmarish in getting amounts out from the coffers of the Government.

But why does GOI formulate such policies where the amounts become due but not paid? The system of having a policy and killing it by procedure is not an honourable one. To say that subsidy is granted to offset farmers’ arrears is a politics of convenience and not the real case. Bottoming out of commodity prices and artificial pricing of state advisory prices are the real reasons.

Maharashtra Government is announcing additional subsidy of Rs 1000($16)/mt on raw sugar to let sugar industry in its region survive. When do Karnataka, Andhra Pradesh, Tamilnadu states follow suit?   NDA government is encouraging more devolution of power amongst states. Such subventions could be common phenomena. Matters with WTO could then be more complicated. 

The clarity must emerge within Government ---if the subsidy for the industry is a must, then WTOs provisions need to be set aside because the world is awash with currency manipulation, deliberate depreciations (Euro at 1.05 and Brazilian Real at 3.12 to one $) and artificial pricing of crude oil. And WTO is a silent spectator to this state of affairs. All reasonable members of WTO will appreciate that if India catches the bull by the horn.


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