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The Indian government has changed its subsidy structure on sugar following criticism from some sugar-exporting countries that the subsidy was not WTO-compliant.
In March 2007, the government had announced that sugar exports would get a transport subsidy at Rs 1,350 crore per tonne for mills located in coastal states, and Rs 1,450 in non-coastal areas (see earlier report ‘India to subsidise sugar exports'). The export subsidy would support domestic prices that had fallen 30% following a bumper harvest and a ban on sugar exports in 2006.
The amended subsidy decrees that subsidies made on exports by road or rail, not sea, will be made on the basis of actual expenditure incurred. Only if the actual expenditure is higher than Rs 1,350-1,450 per tonne will the exporter be reimbursed. The subsidy will remain in place for exporters who move goods by sea.
Sugar-exporting countries that have seen bumper harvests have complained to the Indian government that exports from India to neighbouring countries by road or rail were much cheaper than the subsidy. Such exports would therefore have an unfair advantage which is not in accordance with WTO rules.
India's sugar production in the current season is around 28 million tonnes, up from about 19.2 million tonnes.
August 10, 2007
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