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Government Export Cap Backfires on Indian Sugar Producers

(Chuck Muth) – That which government gives; government can take away.

In an effort to stave off roaring inflation in India, the government recently imposed a cap on the export of raw sugar, hoping to lower domestic prices.

That, according to a Reuters report, has resulted in stocks of raw sugar piling up in ports and warehouses.

The problem is, the government-imposed cap of 10 million tons includes both raw and refined sugar.  And raw sugar, according to Aditya Jhunjhunwala, president of the Indian Sugar Mills Association, “cannot be sold in the domestic market.”


The government’s new export ceiling – combined with logistical problems, including “a shortage of trucks and railway cars” – has resulted in some 200,000 tons of raw sugar being “stuck at ports across the country.”

“If the government allows mills to export their inventories,” a Mumbai-based sugar trader told Reuters, “there will be a lot of buyers, as Indian sugar is very competitive in the world market.”

Of course, a prime reason for Indian sugar being competitive in the world market is because of government meddling with price controls and subsidies.

Which is also why India is at the top of the global sugar market with Brazil and Thailand – which also subsidize their sugar industries and exports.

Such government interference wildly distorts the price for sugar on the global stage – often well below the actual cost of production.  This, a free market does not make.

And as long as countries such as India, Brazil, and Thailand continue to “cheat” through government supply controls and subsidies, the U.S. sugar policy of quotas and tariffs on sugar imports from such countries needs to remain in place.

Only when those countries take off the training wheels should our country lower the bridge.

Free Market Sugar is a project of Citizen Outreach, a non-partisan grassroots advocacy organization