Sugar reform was introduced in Europe in 2006 with the aim of improving competitiveness and market-orientation of the EU sugar sector and guarantee its long term future.
Under the programme, financial incentives are offered to the less competitive producers to leave the market. The goal is to reduce the volume of sugar on the market by six million tonnes by 2010.
However so far only 2.2 million tonnes have been withdrawn from the market - a shortfall the European Parliament sees as being down to insufficient financial incentives being on the table.
Consequently, the European Parliament yesterday voted on proposals to improve to the way the regime operates, so as to avoid arbitrary reduction of quotas.
Indeed, linear reduction in member states' quotas - a scenario that would remove the element of choice for the sugar producers - was suggested by the Commission as part of its package of proposals put forward in May. It was foreseen that these reductions would come into play if producers were not persuade to part with 3.8 million tonnes of quota in 2010.
Although the Parliament's amendments are intended to minimise the chance of this coming to pass, and therefore reduce the harmful effect this would have on producers, it is the Commission that has the final say on the matter.
The Commission is expected to consider the Parliament's ideas, and issue its common position today or tomorrow.
Specifically, Members of the European Parliament (MEPs) agreed that restructuring aid introduced last year for producers exiting the market should increase to €625 per tonne for 2008/9, from its original level of €218.75.
They said aid for those producers that renounce part of their quotas or that do not use their production facilities should be upped to €401.50 for 2006/7 and 2007/8. For 2008/9 they suggest €343.75, and for 2009/10 €286.
Such a structure would, it believes, encourage producers to give up their quotas sooner, rather than hanging on in for as long as possible.
Moreover, the Parliament highlighted the need for business development plans to be drawn up by undertakings, so as to diversify revenue and employment.
Several of the large sugar producers have already switched direction in their business strategies so as to reduce the financial impact of the new sugar regime. For example, Tate & Lyle is now prioritising value added ingredients and health and wellness as core areas of development.
Parliament also proposed better conditions on several other points included in the Commission package.
For instance, the Commission said beet growers would take the initiative and renounce up to ten per cent of an undertaking's quota. The Parliament said that small-scale growers should be the priority here, so that they can have as favourable terms as possible in renouncing the right to transport beet.
In the same vein, to spur more players towards biofuels, the Parliament wants 100 per cent compensation for forms that partially dismantle production facilities in order to focus on trade, instead of 35 per cent offered until now.
Similarly, for restructuring the MEPS want 25 per cent aid, whereas the Commission wants to figure set at 10 per cent.
The Commission has proposed that additional aid to beet growers should be increased €237.5 to €260 for each tonne renounced for 2008/9 (and retroactively for the last two years. MEPs, on the other hand, want this level of aid to hold for 2009/10.
If, at the end of the day, linear reduction is called for, the Parliament believes this should happen in two phases.
The first stage, said MEPs, should only concern Member States or undertakings that have not made any voluntary reduction for 2008/9, or that have renounced less than 13.5 per cent of their quota.
The Commission's formula would only come into play as a second stage.
"MEPs also propose taking into account any renunciations made by Member States and undertakings when calculating the final reductions," said the Parliament in a communiqué.