The objections to the sugar subsidy come from two fronts. One pertains to whether the subsidy will be effective and the second pertains to WTO concerns raised.

· The global glut led to prices of sugar falling globally. The real problem in India is of high cost of production and very high unpaid dues to sugar cane farmers. The government cannot afford an unhappy farmer lobby since cane farmers are very powerful in states like Uttar Pradesh and Maharashtra. The government announced export subsidies for 6 million tons at the rate off Rs.10,448/ton. However, the worry is that this subsidy may fall short as markets were expecting a subsidy of Rs.12,000 per ton. Sugar analysts contend that unless the sugar realizations cross above 13 cents per LB, the current export target of 6 million tonnes may only be reached 50%.

· The second issue pertains to the WTO which could be quite serious. In the case of sugar subsidies; Brazil and Australia have already complained against India to the WTO. While India has justified it, these thorny issues will be a major challenge for Indian attempts to push its global trade.