India’s farm support schemes come under WTO scanner

India is facing increased heat at the World Trade Organisation not only on the minimum support price programmes for wheat but also for other key commodities such as sugarcane and pulses.

While Australia continued raising concerns over a steady increase in India’s MSP for wheat, the US and the EU questioned subsidies on sugarcane, buffer stocks of pulses, and price support for both rabi and kharif crops, at a meeting of the agriculture committee on Tuesday, a government official said.

What makes things worse for India is the fact that while there is increased scrutiny of its support programmes, very little movement has actually taken place on a permanent solution for legitimising its food procurement subsidies as promised by WTO members.

“The absence of a permanent solution on the treatment of procurement subsidies makes India vulnerable when countries point fingers at its domestic programmes. If procurement subsidies continue to be classified as trade-distorting and the method of its calculation is not rectified, India could breach the cap of 10 per cent of farm production when its food security programme is fully implemented. Other countries could then drag India to dispute on the issue,” the official said.

While New Delhi managed to get a peace clause inserted in the rules at the Ministerial meet in Bali in December 2013 stating that there won’t be any action taken against India’s procurement subsidies till a permanent solution is reached on the matter, there are several conditions attached to it that might render the clause ineffective.

“While developed countries’ scrutiny of our farm support programmes is on the rise, there is not much interest on resolving the issue of legitimisation of such subsidies despite the fact that the year-end deadline is drawing near,” the official said.

Drawing attention to India’s MSP programme on wheat at the agriculture committee meeting, Australia said that wheat prices have been declining in recent years and any wheat trade policies that could affect world prices deserved close attention.

It pointed out that MSP in India has been increasing since 2006 while world prices declined.

The concern was shared by the US, Ukraine, Canada and the EU, another official privy to the meeting said.

India said its support prices depended on various factors including the cost of cultivation and market price, and more information could be found on its government website.

India and many other developing countries have been trying to get WTO members to recognise food procurement subsidies as non-trade distorting subsidies.

Alternatively, they want a change in the formula for calculating such subsidies by benchmarking it to current market prices and not market prices prevailing in 1986-88.

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