NEW DELHI (Reuters) - Ministers have proposed giving subsidies to cane growers for produce they sell to sugar mills, as bulging supplies have driven down prices, Food Minister Ram Vilas Paswan said on Monday.
Prime Minister Narendra Modi’s cabinet would consider the proposal soon, Paswan said after a ministerial panel met to address challenges facing growers in the world’s biggest cane producer after Brazil. He did not say when cabinet would decide.
Reuters reported this month that the government was likely to subsidise an industry reeling from a supply glut and struggling to export because of low global prices.
Local refined sugar prices have tumbled more than 15 percent in the past six months, driving down profits at mills, which in turn means lower returns for farmers.
Sugar mills owe 170 billion rupees ($2.62 billion) to farmers because they have struggled due to lower sugar prices and higher government-set rate for cane.
Arrears could climb to 250 billion rupees ($3.8 billion) in 2017/18, a trade body said.
The government is keen to placate India’s 50 million cane growers, who make up an influential political lobby, especially with national elections barely a year away in May 2019.
India is likely to produce a record 30.3 million tonnes of sugar in the 2017/18 season that ends on Sept. 30, up from 20.3 million tonnes in the previous year.
Any move to help for growers might draw the ire of rival producers such as Brazil, Australia and Thailand, which could lodge complaints with the World Trade Organization (WTO) on the grounds that any support could help India sell sugar overseas.
Brazil has already expressed concerns about policies to help sugar exports from India and Pakistan.
Indian officials say plans to directly pay cane growers would not contravene WTO rules.
New Delhi scrapped a 20 percent tax on exports last month and mills have a quota for exports to hit a government-set target of 2 million tonnes of sugar sales abroad. Mills say they still face losses due to low global prices.
Reporting by Mayank Bhardwaj; Editing by Edmund Blair