India to counter Australia, Thailand on sugar subsidy

Written by ASHOK B SHARMA | New Delhi, Dec 2 | Updated: Dec 3 2007, 03:41am hrs
Worlds two leading exporters, Australia and Thailand have questioned Indias inland transport subsidy for sugar exports at the WTO.

India has not only come out in defence of its measures but is also gearing up to counter question the support given by these two countries to their sugar sector.

The India has been compensating inland movement in coastal areas to the extent of Rs 1,350 a tonne and Rs 1,450 a tonne for movement of sugar for exports by mills located in the interior.

The official records have not termed this as assistance and not as subsidy. Reacting to the move by Australia and Thailand, the Indian commerce minister, Kamal Nath has maintained the measure as WTO compatible.

According to sources, India is also gearing up to question the subsidy and support given by Thailand and Australia for sugar exports.

Thailand has set up Cane and Sugar Fund (CSF) and according to records 20,286 million baht had been disbursed to cane growers as interest free long-term loan in the 1998-2004. Most of the loan has not yet been recovered, which practically amounts to making direct payments. Even till date, despite no recovery, CSF continues to extend loan.

The then deputy secretary general of Thai Cane and Sugar Board, Nattaphon Nattasomboon at the 10th Asia International Sugar Conference in May 2004 in Kaula Lampur in Malaysia had admitted that the outstanding loan amount was 15,598 million bhat.

The loan was extended to growers to keep them in cultivation as they were severely affected due to low prices for both sugar and cane, he said.

Australia is the member of Carins group of countries which advocates free and fair trade and asks other countries to phase out their farm subsidies. But it is guilty of veiled subsidization. It may be noted in the context that Australia and Thailand which are guilty of veiled subsidization had successfully challenged EUs cross subsidization of sugar sector alongwith Brazil.

Australia exports about 95% of its sugar and Queensland produces 95% of the sugar produced in the country. The Queensland Sugar Ltd has monopoly rights over procurement of raw sugar from growers for export, a measure which is contrary to the WTO provisions.

Although the applied tariffs on raw and refined sugar in

Australia have been scaled down to zero since 1997, domestic prices of refined sugar are regulated through a complicated internal mechanism of distribution thereby discouraging imports.

Over the past few years, Australia has introduced support regimes like emergency income support, interest rate subsidy and outright grants. About 444 million Australian dollar assistance was approved by the federal and state governments on April 28, 2004 under Sugar Reform Bill.

The Australian support package programme includes, sustainability grant to growers and millers (Aus $ 146 million), re-establishment grant to producers who wish to leave the industry (Aus $ 96 million), grower restructuring grant (Aus $ 40 million), income support (Aus $ 21 million), business planning for growers, harvesters and mills (Aus $ 15.5 million), re-training (Aus 7 million), inter-generational transfers (Aus $23 million) and regional and community development projects (Aus $ 75 million). Funding was initially designed for a 3-year period and some of the components of programme have been completed. The regional community and development projects are slated to continue till June, 2008. This is designed to fund development of food grade low glycernic index sugar and molasses extracts, establishment of a sugarcane mulching facility and improvement of cane transport and management systems.