India’s government sets high sugar prices for its farmers, subsidizes mills to pay farmers the inflated prices, blocks competing imports, offsets farm input costs with subsidies, extends no-interest loans to cane millers, forgives many of those no-interest loans, and subsidizes exports to give its sugar producers a leg up on the world market.
If you didn’t think it could get any sweeter, you don’t know Indian subsidy schemes very well.
According to a report out of The Economic Times, Indian farmers don’t have to pay any taxes. And now it looks like the country’s wealthy are looking to exploit that loophole.
Here’s how the newspaper explained it:
The figure was the result of a Right to Information request by a former tax officer Vijay Sharma, who says the number is probably a computation error and should be closer to 1 percent of GDP or $20 billion…
“It’s a simple case of money laundering,” said Sharma, who served in the tax department for over four decades…
The lost revenue is a blight in a nation where direct taxes as a share of the economy have fallen to the lowest in almost a decade, despite Prime Minister Narendra Modi’s pledge to crack down on tax evasion.
With so little revenue, the government is having to borrow a gross $89 billion to help fund the government and finance spending on roads, ports, power plants and other public projects this fiscal year.
To review: India’s government has so many agricultural subsidies that it’s hard to keep them all straight. Those subsidies created unintended consequences, including tax avoidance by the wealthy. And now there’s not enough money to fund government programs like agricultural subsidies.
It’s a screwy system for sure, but it’s not all that uncommon in global sugar trade, where a laundry list of subsidies has created the world’s most volatile commodity market.
The only buffer America has to this chaos is a no-cost sugar policy. Amazingly, a handful of opponents want to gut that policy and force U.S. consumers to become dependent on places like India for their sugar.
Now that’s screwy.