India’s sugar industry has become the poster child for government handouts lately. But it keeps complaining no matter how much subsidy it receives.
When first confronted by domestic surpluses and global prices deflated by Brazilian and Thai subsidies, India’s government stepped in to ease the pain. In March, it announced $90 million in WTO-illegal export subsidies to help sugar producers offload their excess.
It wasn’t enough. So, a state-level government added another $22 million in export subsidies.
Still not enough. So, the government in the largest sugar-producing state added $320 million in interest-free loans and $140 million in debt forgiveness to the bailout package.
Then the federal government doubled sugar import taxes to fend off foreign competition.
None of that did the trick either, so this summer, the federal government approved nearly $1 billion in interest-free loans for India’s sugar producers – loans that will likely never be repaid, if history is any indication.
Still, India’s sugar producers complained and said they needed more.
And in August, the federal government obliged, saying it would soon force mills to export sugar. Bloomberg reported:
India is considering a proposal to make export of sugar mandatory for mills to trim the biggest stockpiles in seven years, two government officials said.
The government will subsidize the shipments by paying a part of the losses incurred by mills on exports, said the officials, who asked not to be identified as the plan has yet to be approved.
Even after this latest measure takes hold, more aid will likely be needed, Bloomberg was told. Specifically, India’s sugar industry leaders appear to be angling for government stockpiles and ethanol subsidies.
In other words, there’s no end in sight.
Instead of trying to subsidize its way out of a mess created by subsidies, India should embrace the position of U.S. sugar producers. End all global subsidies at once and let the world market price rise to reflect true production costs.