Government’s pre-poll sugar sop questioned at WTO

NEW DELHI: The government's pre-election bonanza for the sugar industry has been questioned at the World Trade Organization (WTO), making it the second farm subsidy to face global scrutiny in recent months.

Australia, Colombia, Brazil and the European Union, along with others have raised several questions including the compatibility of latest set of sops with WTO rules, while some urging India to remove immediately what they described as export subsidies that will potentially impact world trade. The issue was raised at a meeting of WTO's agriculture committee on March 21, said a source familiar with the developments.

Paraguay, Thailand, El Salvador, Canada, the US, Pakistan and New Zealand were the other countries that protested India's export subsidy for sugar meant to clear a glut.

At the meeting, WTO members once again questioned India about details of its support programmes for rice and wheat and its stockholding programme for food security. In a questionnaire circulated before the meeting, the US went to the extent of suggesting that the government's subsidy programme was highly inefficient.

Some of the members also asked India to circulate more up-to-date information on its domestic support — the most recent notification is for the 2003-04. Government officials said the notifications are being prepared and there was no question of breaching the prescribed limits.

The government's trade policies have come under intense scrutiny in recent months. But, the immediate focus was on sugar export subsidies, which hogged limelight at the meeting. Sources saidAustralia, Colombia, Brazil and the EU went to the extent of seeking the legal basis for the export subsidies announced last month. They also said that India has agreed not to subsidize exports.

Indian officials defended the move and said the policy is designed to encourage diversification from white sugar to raw sugar and that no intervention payments have been paid yet. The total is not expected to exceed the equivalent of $80 million, they said.

Australia said the Rs 3,300 per tonne incentive payment is the equivalent of 14-16% of the world price. Since India is the third largest exporter of sugar, this threatens to distort trade seriously, Australia said, adding the amount could potentially finance its own exports half way across the Pacific.