Government Subsidies https://www.wsj.com/articles/india-buried-in-sugar-tries-to
ID: 1162707 • Letter: G
Question
Government Subsidies https://www.wsj.com/articles/india-buried-in-sugar-tries-to-dig-out-1527591604?mod=djem_jiewr_IB_domainid The Indian government sets price guarantees for growing sugar but the farmers are only paid when refiners sell the sugar. The price of sugar is currently so low that refiners are hesitant to sell of their huge and growing sugar stockpiles. Refiners are hoarding the sugar and waiting for a better price or better incentives to sell. The Indian government wants to incentivize the refiners to sell the sugar, but if the refiners dump the sugar on the global market at too low a price, India risks sanctions from the WTO.
How should India address its vast sugar stockpiles?
Explanation / Answer
Due to bumper production of Sugar and supply exceeding the demand, India has created stockpiles of sugar. Government is spending for storage facility of the rising sugar production so that hoarding can increase the domestic prices and thus the refiners can sell their produce at normal prices also Minimum support price at Rs. 29 per Kg has been set. Apart from this rather than dumping it in the international market it should rather export and for that Indian government should offset sugar export taxes and give subsidies to the sugar producers so that exports can rise and hoarded produces can be set off.
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