Union Commerce secretary G K Pillai told reporters that anticipated decline in local production in the EU would provide the Indian sugar industry with an excellent export opportunity, that could be a natural hedge against domestic price fluctuations.
The Ministry of Commerce expects sugar production in the European Union to decrease 25 per cent by 2009, thanks to April 2005 ruling of WTO Appellate Body against subsidies to European farmers.
"The Indian industry has to decide whether we want to take the opportunity or not," Pillai said.
Asking the Indian sugar industry to seize the opportunity, Pillai drew a parallel with the capture of the European gherkin market by Karnataka. Today, exports of gherkins from the State (Rs 600 crore) account for about 90
per cent of the European market, he said.
When the cost of production of gherkins in Europe became too high, production shifted - about nine years ago - to Turkey. Turkish farmers later found out that growing tomatoes was more profitable and vacated gherkin production.
The EU has about 20 million tonnes of sugar capacity, with France, Germany and Poland accounting for half of it.
After the WTO panel, upon a complaint by Australia, Brazil and Thailand, found that the subsidies provided to farmers were trade distorting, the EU began implementing a restructure scheme.
Such a scheme would lead to closure of factories that are not economically viable - the factory owners are to be compensated out of a fund created by a capacity-based levy of cess on all sugar companies.
