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India Adds Loan Forgiveness
to Its Growing List of Subsidies

Months after receiving preferential government loans, Indian sugar farmers soon will be allowed to walk away from their debts without repayment of either principal or interest, according to a Dec. 9 article by Bloomberg.

The outlet explained how some well-heeled agribusinesses are using the free money to expand at a time when the world sugar market is awash in a glut of subsidized surplus.

    Vattikuti Prasad grows rice, bananas and sugar cane on his farm as big as 27 football fields in a part of southeastern India where most farmers own plots the size of just one. He has two homes, including a four-bedroom house he rents out in a nearby town.

    This year Prasad took out...cheap farm loans from State Bank of India and said he planned to use them to open a third branch of his pesticide and seed business in the state of Andhra Pradesh. And for the second time since 2008, he wonąt be paying the money back: The government has offered to forgive 350 billion rupees [$5.6 billion] in agricultural loans, according to a report seen by Bloomberg News.

    "It is easily available, so I'm taking it," Prasad, 37, said while counting a wad of 1,000-rupee notes from his shop's cash drawer under a noisy ceiling fan in the punishing heat. As many as 80 percent of fellow businessmen in his town of Tanuku, a 400-kilometer (250-mile) drive from Hyderabad toward the Bay of Bengal, have spent their farm loans on all kinds of things, especially buying more land, he said, with the confidence the money is free. "Why should we repay now?"

    As part of campaign promises to win re-election earlier this year, officials in Andhra Pradesh as well as neighboring Telangana state promised farmers debt relief. Andhra Pradesh offered to waive as much as 150,000 rupees per farmer, Telangana 100,000 rupees. Both states are following a 2008 precedent, when the central government forgave 710 billion rupees [$11.4 billion] in loans to 40 million farmers nationwide...
Combined with controversial export subsidies, government market mandates, and recent bailouts for cane mills, India seems to be pulling out all the stops in a three-way sugar subsidy race with Brazil and Thailand.

Unfortunately, such actions have gutted global sugar prices and harmed farmers in many developing nations as a result.

It serves as yet another example of why a zero-for-zero sugar policy is so sorely needed.

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