Do you see the negative order from the WTO impacting the fortunes of sugar companies in India like Balrampur, Dhampur, EID Parry and Dalmia Sugar?

The WTO on Tuesday ruled in favour of Australia, Thailand and Guatemala and against India in the sugar subsidy case. This case dates back to the period between 2014 and 2018. During this period, India was left with surplus sugar stocks but could not export as Indian sugar prices were uncompetitive. To rectify the situation, the government started giving export incentives to the Indian sugar exporters to boost exports.

The main contention of the sugar producing countries like Brazil, Thailand, Australia and Guatemala was that the Indian government was giving an artificial edge to domestic sugar companies by way of generous subsidies. According to the ruling, most of these subsidies were beyond the 10% limit permitted by WTO for agricultural product exports. However, Ministry of Commerce and ISMA have dismissed the ruling as being baseless.

India plans to go on appeal against the WTO order and that would mean an inordinate delay in the resolution. The stand is that Indian sugar subsidy policy was in sync with stipulations of WTO regarding subsidies for agricultural exports. Interestingly, the appellate authority of WTO does not have enough judges right now so the case is likely to be held up indefinitely at the appellate authority. It would surely be a long drawn process.

For sugar cycle year (Oct to Sep) FY22, the government is paying NIL subsidies. So the question does not arise. The subsidies were much smaller in the last two years, so the problem pertains only to the period prior that. This year, India has exported nearly 6 million tonnes of sugar with zero subsidies. For now, it looks like a long-drawn game of appeals and counter-appeals. Most sugar stocks are unlikely to be impacted meaningfully.