India's sugar policy impacts US producers

Antoine Meriot, a French economist released a study that pinpoints the estimated $1.7 billion in annual benefits flowing to India's sugar producers.   At the heart of India's subsidy system are government-mandated prices for sugarcane. These prices, which are paid to farmers by the sugar mills that process the cane, are much higher than elsewhere. For example, India's farmers received $42 per metric ton of cane in 2014, compared to the $31 seen by U.S. farmers. This equated to a $1.598 billion subsidy in 2014 and $1.125 billion in 2015, compared with the market-oriented approach favored by Indian sugar policy reformers. To help offset inflated prices, the government gives sugar mills soft loans, which "have provided interest forgiveness for a total amount of about $440 million over the last nine years," he wrote.  Additional supports identified by Meriot include: $62 million in export subsidies in the past two years; $134 million from 2007 to 2015 to build and maintain buffer stocks; $173 million budgeted this year to help reduce surpluses; import duties at 40 percent; and $831 million in interest-free loans since 2008 to modernize mills, fund research, and support energy production from sugar.  India's massive handouts, Meriot explained, have kept inefficient producers in business, encouraged overproduction, and helped distort global prices.  "The Indian sugar policy generates a vicious cycle of expenditures but the [government] will not hesitate to intervene and support its industry if necessary, even if it involves costly subsidies and controversial export support," he concluded.  That sentiment was echoed loudly by India's government officials in the May Wall Street Journal article, which noted: "'The question of cutting back on the handouts does not arise,' said an official at the Ministry of Agriculture. ‘We will not deviate from our duty of farm welfare.'"  Such is the world in which America's efficient farmers and ranchers must compete.