Foreign Supplier Profile: India

Government Intervention

India is the world's second largest sugar producer and its industry is closely regulated and supported by the government. The Indian government strictly regulates the production, sale, and trade of sugar, with an emphasis on protecting sugar consumers and growers.

To protect itself from cheap sugar from the world dump market, India levies tariffs on imported sugar. Though the current import duty has dropped to 60% since late 2006, the WTO allows India to impose tariffs of up to 150%.

In addition to import tariffs, the government controls domestic supplies via the "levy" system and "monthly release" quotas.

Under these systems, Indian sugar mills are required to sell a percentage of their sugar to the government-controlled Public Distribution System at a fixed price that is generally below free market price levels. Remaining sugar can be sold to the domestic market through a strictly regulated monthly quota system.

Indian sugar growers also benefit from numerous subsidies including:

• those that offset land maintenance and input costs such as irrigation, fertilizer, and credit;
• soft loans and debt restructuring;
• loans given to mills based on “buffer stocks,” stocks that mills maintain against which they can qualify for loans and for which they are reimbursed for storage, insurance and interest;
• numerous local government  “late crushing” subsidies that incentivize leaving cane uncrushed through the normal harvest season.

Production, Price, and Trade

India's sugar production varies widely from year to year, depending on the weather and on government policies, and recently has averaged about 25 million metric tons per year. India swings widely from a net exporter some years to a net importer other years. Again, government decisions of pricing, stocks, and trade strongly influence India's export/import status.

Indian sugar firms are currently allowed to import raw sugar duty-free only if the same consignment is refined and shipped out again.

India is one of the 41 countries from which the United States imports sugar. The U.S., the world’s third largest importer of sugar, is forced to accept this sugar whether the market needs it or not, and whether India is a net exporter or not.  USDA projects India to import 1 million tons of sugar this year, while the U.S. imports about 1.5 million tons of sugar annually.

The U.S. market is already oversupplied with subsidized foreign sugar, driving down prices, forcing facilities to close, and threatening 146,000 U.S. jobs. Further unneeded increases in subsidized sugar exports to the U.S. could jeopardize the operation of the U.S. sugar program and threaten the livelihood of still more efficient U.S. sugar farmers.