The world’s largest sugar exporting nations are calling on their governments and the World Trade Organisation to step in and wind back India’s plan to kickstart exports to bolster its ailing domestic industry.
Last week India announced a $1 billion scheme, in addition to a round of domestic industry assistance announced earlier this year, which could subsidise up to 5 million tonnes of exported sugar
A general election is due by May next year and the federal government is looking for a political fix on the international market for the financial hardship faced by tens of millions of people in cane-growing families.
Farmer subsidies brought a glut of sugarcane onto the market, and farmer debt is biting in the electorate, where around 70 per cent of people live in a household that derives income from farming. Canegrowers number in the tens of millions.
Federal Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, announced a plan to clear the cane stockpiles at mills and reduce farmers’ unpaid dues:
- Transport subsidies for millers further than 100 kilometres from the coast – to encourage them to cart cane for export.
- Subsidies to millers per tonne of processed cane, with payments going directly to farmers with unpaid dues.
Earlier this year the global market plunged towards $300/t in anticipation of India’s export push, roughly 30pc below the cost of production in Australia and it could fall even further.
Chairman Global Sugar Alliance and Managing Director Queensland Sugar Greg Beashel warned of “dire social and economic consequences” around the world if the subsidies aren’t repealed.
“The Global Sugar Alliance calls on governments from sugar producing countries around the world to launch a WTO action to limit the damage,” Mr Beashel said.
“The illegal subsidy announced by the Indian Government caused life-of-contract low prices in the subsequent trading session of the world sugar market.
Executive director of UNICA, the Brazilian sugar industry association, Eduardo Leão de Sousa said India had sent the wrong signal to its growers and the international industry.
“Artificial solutions such as export aids, may seem to be an ease solution to get rid of surpluses but they are highly distortive for international trade and must be condemned,” he said.
“The Brazilian industry does not see these measures as an option and we have been encouraging our government to challenge them in the WTO dispute settlement mechanism.”
Thai Sugar Millers Corporation chairman Vibul Panitvong asked his country’s Mission at the WTO in Geneva to raise “urgent questions” with India.
The $300/t global price is roughly 30pc below the cost of production in Australia and it could fall even further as Indian exports make their way into the market. The long term sustainable price for Australian canerowers hovers between $400/t to $450/t.
Australian sugar employs 16,000 people across the value chain. Exports comprise 7pc of the global market and generate $2b export income.
However, there are even more pressing issues on India’s domestic agenda.
The shrinking size of landholdings puts pressure on income and leaves most unable to access bank loans and exposed to predatory lending.
The farmer suicide rate, driven by debt, is at tragically high levels.
The most recent statistics from the National Crime Records Bureau recorded more than 8000 farmer suicides and 4595 agricultural labourer suicides in 2015.