India’s challenge of WTO verdict on sugar

India’s challenge of WTO verdict on sugar

India’s challenge of WTO verdict on sugar- Today Current Affairs

GS- 3 India’s relation with International Organisation

India has filed an appeal with the appellate body of the World Trade organisation disputing the world by the WTO dispute settlement panel on sugar subsidies. The WTO dispute settlement panel had ruled that India, by subsidising sugar producers, was breaking rules framed under the General agreement on tariffs and trade (GATT)which govern international trade.

What is the whole matter? The Hindu Analysis

  • India is the second largest sugar producer in the world after Brazil and it’s estimated that more than 5 crore people depend on the cultivation of sugarcane alone for their livelihood.
  • In 2019, Australia, Brazil and Guatemala complained against India at the WTO arguing that subsidies offered by the Indian government to sugar producers were against the rules governing international trade.
  • According to these countries the subsidies exceeded the limit imposed by WTO trade rules.
  • As per the WTO rules subsidies cannot exceed 10% of the total value of sugar production.
  • The argument of 1 by this country is that the subsidy of a bi India has led to increased production of sugar and caused the price of sugar to drop significantly in the global market.
  • In December 2021 that WTO ruled that India sugar policy was favouring domestic producers through subsidies to the detriment of foreign producers.
  • The WTO dispute settlement panel recommended that India withdraw its alleged prohibited subsidies under the production assistance, the buffer stock and the marketing and transportation scheme within 120 days from the adoption of this report.
  • India has stated that the WTO dispute panel ruling has made certain”erroneous” funding about domestic schemes to support sugarcane producers and exports and the findings of the panel are completely unacceptable to it.

 India’s stand: The Hindu Analysis

  • As per India’s argument at the WTO, it does not offer direct subsidies to sugarcane farmers and does not break any international trade rule.
  • However, the alleged country is claiming that the centre and the state government in India mandate the minimum price (FRP) at which sugar Mills can buy sugarcane from farmers.
  • In August 2021 the centre set the FRP at rupees 290 per quintal and called it the highest ever FRP for sugarcane procurement.
  • Individual states also set minimum Procurement prices that may be higher than the centres tries to adjust for conditions at the local level.
  • Due to the high requirement price for sugarcane there has been the supply glut causing sugar prices to drop.
  • This has further landed sugar mills in deep trap as consumer demand for sugar has remained stagnant.
  • The low price of sugar has affected the revenue of males, their ability to pay farmers and also force man mills to shut down.
  • To help the sugar sector the centre has even mandated the compulsory blending of ethanol driven from sugarcane with fuels such as petrol and diesel.
  • To reduce the debt burden the centre decided to reconstruct loans worth over 3,000 crore offered to sugar Mills by the sugar development fund.
  • For the centre sanction fund to encourage sugar Mills to export sugar depending on sugar prices in the global market.

Way forward

  • The WTO appellate body’s decision will be considered final on the dispute.
  • Incase India refuses to comply with the decision it might have to face retaliatory action from other countries.
  • This could be in the form of additional tariffs on Indian export and sugar stringent measures.
  • Incidentally the appellate body is not functioning because of differences among member countries to appoint members and disputes already pending with it.
  • The U.S. has further blocked the appointment of members.

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