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Another Day, Another Bailout for India’s Subsidized Sugar Sector

(By Phillip Hayes) – A subsidized bailout package worth approximately $320 million was just announced for India’s struggling sugar sector.

But before we dissect the details of the latest subsidy handout, let’s first revisit India’s other big subsidy announcements this year, which are helping destroy the world sugar market.

There is a glut of subsidized sugar around the world. This surplus combined with Brazil’s devalued currency have depressed export prices so much that India’s sugar mills are hard-pressed to profitably ship the country’s surpluses to foreign countries.

Enter the first big bailout package of the year.

In February, India’s federal government approved an export subsidy of roughly $90 million to help mills unload 1.4 million tons of excess sugar – a move that led sugar producers in Thailand to urge their government to file a WTO case because India’s subsidies were hurting sales of heavily subsidized Thai sugar.

Indian sugar mills said the controversial subsidies still weren’t high enough. So despite international pressure over subsidized dumping, the country’s top sugar-producing state of Maharashtra announced its intention to kick in an additional $22 million from state coffers to further subsidize exports. That subsidy, which will act as yet another bailout package for many producers, was finalized on April 13.

But India’s sugar industry still wants more, which brings us to the most recent announcement.

Maharashtra is offering $320 million in interest free loans to sugar mills.

That’s not all. A state official explained that the local government has already waived a $140 million tax imposed on sugar factories.

And if history is any guide, this tax isn’t the only thing likely to be waived. India has a dubious track record for forgiving the debt on the loans it extends, including $11.4 billion and $5.6 billion in agricultural debt forgiveness in 2008 and 2014 respectively.

In other words, a $320 million loan package might become a direct subsidy pretty soon.

Seems like it ought to make the sugar industry lucrative, yet India’s appetite for sugar subsidies is insatiable. Sugar industry leaders announced new subsidy demands during an April 15 meeting with the nation’s Food Minister, including additional export subsidies, direct payments to farmers, and the creation of a government sugar stockpile.

Needless to say, the world sugar market is a mess right now, and countries like India are only making matters worse. The time has come for a global Zero-for-Zero sugar policy, which is built on the idea of free markets void of government distortion.

(Mr. Hayes is Director of Media Relations for the American Sugar Alliance)