India's move lates sugar subsidy action

U.S. sugar producers have publicly backed a “zero-for-zero” sugar policy, which would promote an end to global sugar subsidies in favor of a free market. Meanwhile, foreign sugar producers have been busy ratcheting up their subsidies and artificially manipulating global prices.

The latest example comes from India, the world’s second biggest sugar producer and third largest exporter in 2011. The Indian government is reportedly finalizing big tax breaks and other incentives for sugar mills to boost exports.

Here’s how Reuters described the scheme in a Dec. 31 article:

"Mills can offer discounts and seal export deals if the government provides them some kind of financial support for raw sugar production," said Kamal Jain, managing director of Pune-based brokerage Kamal Jain Trading Services.

Subsidies for exports could attract the attention of the World Trade Organization (WTO) but government officials maintain that any incentives on production would not violate WTO rules. High production costs for refined, or white, sugar because of government-set prices for cane squeeze companies if they export at big discounts.

This latest subsidy is on top of a Dec. 20 action by Indian officials to provide more than $1 billion worth of interest-free loans to bailout India’s already-heavily-subsidized domestic industry.

And if India takes a cue from Brazil’s playbook, expect the debt from those interest-free loans to be soon forgiven, making it a full-fledged subsidy.

Unlike U.S. farmers, India benefits from certain loopholes under WTO rules that enables it to shield subsidies to its sugar industry.