With such sweet incentives from India’s government, Indian farmers continue to grow the crop far in excess of what can be consumed at home. And with an equally huge glut of sugar in the global marketplace, India can’t sell its excess without additional government export subsidies, further distorting the market.
And while India is allowed to sell sugar to the U.S., there are quotas in place to prevent them from dumping artificially cheap sugar here and thus destabilizing our own sugar industry, which gets no direct subsidies from U.S. taxpayers. So now India is, literally, giving sugar away.
A “senior government official” told the Business Standard in New Delhi on August 11, 2015 that India is “looking at giving sugar as part of the aid programme to African nations.”
Sounds like India is trying to do something nice for Africa until you realize that many African nations also produce sugar and depend on sales to their neighbors. It will be hard for farmers in these developing nations to compete with a free sugar dump from the Indian government.
The Business Standard continued about India’s efforts…
“Although exports via normal route are not viable now due to sharp decline in global prices, the government is trying all options to push export of four million tonnes of surplus sugar to help cash-starved domestic mills make payment of dues over Rs 14,000 crore to cane farmers.
“The sugar industry is unable to make payment as it is facing severe liquidity crunch on account of surplus production that has resulted in low prices of sugar in domestic markets.
“Sugar output has exceeded domestic demand in the world’s second largest sugar producing country for the last five years and the trend is expected to continue in this marketing year (October-September) too.
“The country is estimated to produce 28 million tonne sugar in 2014-15 marketing year, against annual demand of 24.8 million tonne. There is still surplus stock of 10 million tonne in the country.”
As long as the Indian government continues to prop up and incentivize sugar production despite the ongoing glut of the commodity, the global price of sugar will continue to be distorted when it comes to American farmers who operate without such direct government assistance.
Only by eliminating all government subsidies and support programs among all sugar-producing countries simultaneously will a true free market in sugar be possible.