India considers more sugar export subsidies to cut reserves

New Delhi

INDIA plans to bolster efforts to boost sugar exports and help beleaguered mills in defiance of criticism from Brazil and Australia that its existing subsidies are keeping global prices low and hurting their farmers.

The government may reimburse exporters some ocean freight and marketing expenses, according to people familiar with the proposal, who asked not to be identified as it isn't public. The new measures would be in addition to current subsidies, which help millers with local transport costs and clearing arrears to growers, and be compliant with World Trade Organization rules, they said.

Such a move by India, struggling with record stockpiles, may rankle other producing countries. Australia, Brazil and Guatemala have jointly requested the WTO set up a panel to challenge India's subsidies and make the nation more accountable for its "trade-distorting" policies. India vies with Brazil as the world's biggest sugar producer.

The government is also mulling an increase in buffer stockpiles, and may ask millers to boost sugar reserves to five million tonnes from three million tonnes announced earlier, the people said. India may boost spending on storage expenses to 20 billion rupees (S$395.5 million) from 11.75 billion rupees. A food ministry spokesperson was not immediately available for comment.

India approved a plan in September to provide 55.38 billion rupees to sugar mills to boost exports and cut a domestic surplus. It also more than doubled the subsidy it pays for cane in the year that began in October to help mills clear dues to farmers. Plus, the nation gave the go-ahead in February for a proposal to ask commercial banks to lend as much as 105.4 billion rupees in subsidised loans to help mills pay growers.

A policy to help boost sugar exports with a view to reducing reserves should be announced this month, according to the Indian Sugar Mills Association. Opening stockpiles on Oct 1 are seen at 14.62 million tonnes, about 9.5 million tonnes more than the requirement to meet local demand for more than two months.

Mills are looking to export a record seven million tonnes in the year starting in October, according to the association. That compares with about three million tonnes estimated for 2018-19. The group has asked the government to provide export subsidies, but says any help should be within WTO rules. It also wants the government-controlled minimum price to be raised to 35-36 rupees per kilo from 31 rupees.

Some partial relief from bulging stockpiles may come from lower crop output. Sugar output may drop to a three-year low of 28.2 million tonnes in 2019-20 from a record of 32.95 million tonnes this year as dry weather parches fields in some major growing areas, according to the association. BLOOMBERG