The Indian government subsidies to sugarcane farmers and industry haven’t gone down well with the global sugar producers.

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After Australia put allegations on March 1 against India, the country has not gone ahead and approached the World Trade Organization (WTO). The Minimum Support Price (MSP) and export subsidy provided to cane and sugar producers by the Indian government is said to be violating the global trade norms.

As per the WTO norms, subsidies cannot be more than 10 percent of the value of the product. India sets Fair and Remunerative Price (FRP) as the minimum price for sugar cane, which has been increased multiple times in past years. In addition to that, India gives export, transport and buffer subsidy, and has fixed a minimum sugar selling price too.

Also, there is a debate on what year, price and value should the subsidy be counted on? Australia and Guatemala have alleged that the FRP is not market determined and due to higher cane prices, India encourages higher sugar production.

India has replied to allegations, but that has not satisfied its global counterparts leading to complaints to the WTO from Australia, Brazil and Guatemala. Joining these countries are Europe Union and Russia with similar allegations against India. The first round of consultations are scheduled for April 15-16, 2019.

Consultations are part of WTO dispute settlement mechanism. If consultations with India do not work, the next step then is to file a dispute with WTO. Consultations will require India to furnish calculations, documents and annexures to justify the subsidies. If the consultations do not yield the desired result, then the next step is to file a dispute.

On the global platform, India is already at a disadvantage as it is unable to export its excess production after it competes on prices with other producers.

Meanwhile, sugar prices across India trade weak on global cues, weak demand and pressure on mills to liquidate stocks. This comes after arrears towards the cane farmers increased and state and central governments are working towards to clear the amount ahead of the elections.