Call for WTO ban on Indian sugar subsidy

18/06/2015 10:31 - 559 Views

The Thai Sugar Millers Corporation Limited (TSMC) has urged the Thai government to seek a World Trade Organization (WTO) action to stop an Indian sugar export subsidy because it hurts major regional sugar exporters, including Thailand and Australia.

TSMC chairman Sirivuth Siamphakdee sent a letter to the Commerce Ministry's Trade Negotiation Department outlining the request. The subsidy makes Indian sugar prices unrealistically lower than market prices, he said.

"The Indian export subsidy is completely distorting the market and is against WTO rules. It adversely affects world sugar prices, hurting other major sugar exporters including Thailand, which is the world's second-biggest sugar exporter. So we urged our government to do something to stop India from subsidising exports," said Mr Sirivuth.

In 2014, the Indian government started subsidising raw sugar exports by paying a "marketing and promotion services" fee to exporters of 3,300 rupees per tonne, or around US$54 (1,750 baht), making Indian sugar cheaper than its competitors.

India exported 4 million tonnes last year, or around 2% of total sugar consumption across Asia. He said this eroded the market share of Thailand and Australia, which exported 7 million and 4 million tonnes, respectively. India has subsidised 1.4 million tonnes of sugar exports this year, increasing its subsidy rate to 4,000 rupees a tonne.

Traders said the sugar subsidy had put pressure on global sugar prices, which have fallen by more than half from a record high of 36 cents per lb. The New York raw sugar futures, which sets global price trends, recently moved in a range of 14-15 cents per lb.

"The Indian subsidy encouraged investment funds to liquidate contracts on the New York raw sugar market, influencing physical market prices to stay at a low level," said an industry official.

Source: Bangkok Post