Explained | What is the dispute about sugar subsidies at WTO? Premium

India is set to negotiate a long-standing dispute with Brazil about domestic sugar subsidies at the World Trade Organisation, following a complaint filed by Brazil in 2019.

The story so far: News agency Press Trust of India (PTI) learnt from sources that India is in negotiations with Brazil to resolve a long-standing dispute about sugar at the World Trade Organisation (WTO). The Ministry of Commerce and Industry is also coordinating with the concerned departments to arrive at possible alternatives. The same approach has been adopted with other complainants in the dispute.

Back in 2019, the South American nation had submitted a complaint against India alleging that the latter’s according of sugar subsidies was inconsistent with global trade rules. 

In February 2019, Brazil, Australia and Guatemala sought consultations with India, concerned about domestic support measures to agricultural producers of sugarcane and sugar. They alleged that India for five years, from 2014-15 to 2018-19, provided domestic support in excess of the permissible 10% of the total value of production— thus, inconsistent with the norms laid out under the organisation’s Agreement on Agriculture.  

The countries argued that the minimum prices of sugarcane and sugar, specifically fair and remunerative prices (FRP) alongside specific states enforcing higher minimum prices, incentivised Indian sugarcane farmers. This led to increased domestic production of sugarcane and sugar. It contended that with production exceeding domestic demand, and ensuing increases in sugar stocks, the government also intervened in the market with assistance programmes, thereby facilitating lowered prices for the commodity in the global market.  

The complainant also argued against India’s mill-specific Minimum Indicative Export Quota (MIEQ) wherein sugar mills must export an allocated amount of sugar by the end of each season (October-September). It alleged that certain support measures were dependent on compliance with the MIEQ, or otherwise dependent on export performance. MIEQ allocates the minimum quantity of sugar which must be exported and distributes that quantity among individual sugar mills operating in India. 

India is the second-largest producer of sugar in the world behind Brazil, which also is the largest exporter. 

WTO constituted a panel to study the allegations in October 2019, which submitted its report in December 2021.