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Sugar producing countries concerned at potential for more contentious Indian sugar subsidies

13/August/2021

The Australian Sugar Milling Council (ASMC) says there is widespread concern amongst the world’s major sugar producing countries that the Indian Government might be contemplating further contentious export subsidies that will negatively impact world sugar prices.

On top of the unrelenting climate and pandemic challenges already facing sugar producing countries, they fear that the estimated USD$10 billion damage already caused to the industry globally by India’s overproduction of sugar will continue to grow.

ASMC’s Director of Policy, Economics and Trade, David Rynne, says the World Trade Organisation is currently hearing a dispute on India’s sugar export and (sugar cane) market price support subsidies with Australia one of the complainants.

“India is the world’s second largest sugar producer. It has opted for sugar export subsidies and regulated high domestic cane prices rather than accept expert advice1 to implement industry reform that would address chronic overproduction of sugar cane and sugar”, Mr Rynne said.

“ASMC recently commissioned a report2 from Green Pool Commodity Specialists who estimated that India’s overproduction between 2017/18 and 2020/21 had a AUD$1 billion (USD$731 million) revenue impact on the Australian sugar industry”.

“Green Pool found that the subsidies and global oversupply had forced down the price of sugar on global markets by an average two cents a pound over the four years”.

“By applying a two cents a pound price reduction to US Department of Agriculture (USDA) sugar production figures we can see the extent of the damage caused globally to large and small producing nations which totals USD$10 billion including USD$6.16 billion for Brazil, USD$1.47 billion for Thailand, and USD$327 million for Guatemala”, he said.

Mr Rynne expressed concern that recent media reports indicated that the Indian Government is currently considering further export subsidies for the 2021/22 season which commences 1 October.

1 Most notably the Niti Aayong Taskforce report, Sugarcane and the Sugar Industry, March 2020 at http://www.niti.gov.in/sites/default/files/2020-08/SugarReport.pdf

2 The Green Pool report can be found at https://asmc.com.au/crushed-queensland-sugar-industrys- 1b-hit-from-indian-subsidies-revealed-15-july-2021/

ABN: 44 010 779 496 Australian Sugar Milling Council

IBM Building Level 11 / 348 Edward St Brisbane GPO Box 945 Brisbane Qld 4001 Australia

P +61 (0) 411 933 500 E asmc@asmc.com.au

www.asmc.com.au

“This would further damage the global market and impact cane growers, millers and exporters in numerous countries at a time when we are all facing the challenges of COVID- 19 and many national crops are affected by extreme and extraordinary climate”.

Mr Rynne said that the Indian Government has regulated the price of sugar cane well above global levels for years, and through payments to cane farmers and sugar mills directly had subsidised the export of up to six million tonnes of sugar per year.

“As the 2020 Niti Aayong Taskforce Report found (page 16):

Serious policy distortions in sugar sector are continuing to result into excess sugar production over domestic demand

The fiscal and natural resource cost interventions in sugarcane and the sugar industry are enormous

There is a need for complete restructuring of sugar industry in a phased manner”.

“There is no denying that the Indian sugar sector needs significant reform and we call on the Indian government to not introduce export subsidies for their 2021/22 season”, Mr Rynne said.

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