What do you call an interest-free $940 million loan that likely will never have to be paid back?
Besides calling it one heck of a great deal, you could also call it a “subsidy.”
But in the case of some sugar mills in India, they call it “not enough.”
India’s sugar producers have fallen on hard times in recent years, as Brazil (aided by a devalued currency) and Thailand (aided by at least $1.3 billion in subsides) have sent global sugar prices spiraling downward.
India’s government has responded with a string of bailout packages that have encouraged exports, and ironically worsened the collapse of sugar prices. The new $940 million interest-free loan program, announced June 10, was summed up by Bloomberg News:
Sugar mills in India will get 60 billion rupees ($940 million) in interest-free loans from banks to help them partly clear dues to cane farmers…
Mills’ debt to growers mounted as the price of sugar they sell in the local market doesn’t cover the raw material costs and as production surged to an eight-year high. This is the second time the government is extending free loans to mills since 2014 after measures including higher import duties and export subsidies failed to boost prices.
Considering India has a history of forgiving loans like these – as was the case with $11.4 billion in agricultural loans in 2008 and $5.6 billion in 2014 – one would think India’s sugar sector would be jumping for joy.
Wrong. Instead they are jumping all over the government for not doing more.
Bloomberg noted that Abinash Verma, director general of the Indian Sugar Mills Association, said the loans will provide limited relief and wanted the government to take the next step by removing 3 million tons of sugar in a new government stockpiling program.
Such moxie is truly amazing. After all, here’s a list of other government bailouts aiding India’s sugar industry this year alone.
- $90 million in WTO-illegal export subsidies from the federal government.
- $22 million in WTO-illegal export subsidies from a state-level government.
- $320 million in additional interest free loans to sugar mills and $140 million in tax debt forgiveness from a state-level government.
- A doubling of import taxes to block foreign sugar.
- Elimination of excise tax on ethanol to promote sugar-based fuels.
What Verma and his peers fail to recognize is that the sooner global sugar subsidies are reigned in, the sooner global prices will rise to reflect the cost of production.
That’s why U.S. sugar producers are backing a global Zero-for-Zero sugar policy, and why we oppose India’s proposed stockpiling program, and its $940 million interest-free loan program, and its debt forgiveness, and its illegal export subsidies, and its…well, you get the idea.