At WTO India Gets Platitudes, No Permanent Solution

At a meeting of the Agriculture Committee of the World Trade Organization (WTO) held on March 28, 2017, the developed countries lambasted India on its Minimum Support Price (MSP) programme for wheat and other key commodities such as sugarcane and pulses. While Australia raised concerns over an increase in India’s MSP for wheat since 2006, the US and the EU questioned the subsidies on sugarcane, the buffer stock of pulses and price support for both rabi and kharif crops. But there was little movement on“permanent solution for legitimizing its food procurement subsidies”, an issue of great concern to India.

- Uttam Gupta

Ever since the World Trade Agreement (WTA) came into effect in 1995, the developed countries have been obfuscating issues concerning commitments of member nations. While the developed nations never allowed any discussion on subsidies given by them, the developing countries have been “unfairly” criticized for their subsidies given to protect poor farmers.

Ironically, the WTA itself was crafted in a manner so as to favour the developed countries. Under the Agreement on Agriculture (AoA), the developing countries can give subsidy on food for public stockholding operations - called aggregate measurement support (AMS) - up to 10% of the value of agricultural production. The corresponding figure for the developed countries is 5%.

Considering the advanced stage of agriculture in the developed nations, the smaller number of their farmers and a much higher level of their farm income, the 5% subsidy cap by itself is much too generous. Even this, they circumvented by putting most of their subsidies in “green box” which enabled them to secure exemption from reduction commitments. For the developing countries, given their predominantly subsistence farmers and measly income, even the 10% ceiling is much too stringent.

The AMS includes “product-specific” and “non-product-specific” subsidies, viz, subsidies on agricultural inputs, fertilizers, seed, irrigation, electricity, etc. The “product-specific” subsidy is computed as excess of MSP paid to farmers over international price – or external reference price (ERP) – multiplied by the quantum of agricultural produce whereas “non-product-specific” subsidy is the money spent by the Government on schemes to supply agricultural inputs at subsidized rates.