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Business News/ Politics / Policy/  India notifies farm subsidies to WTO, claims no breach of limits
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India notifies farm subsidies to WTO, claims no breach of limits

India seeks to address rich nations' complaints that it doesn't comply with WTO notification requirements

Trade minister Nirmala Sitharaman told reporters on Wednesday she hoped that a permanent solution on the food subsidies issue will be simultaneously implemented with the TFA. Photo: PTIPremium
Trade minister Nirmala Sitharaman told reporters on Wednesday she hoped that a permanent solution on the food subsidies issue will be simultaneously implemented with the TFA. Photo: PTI

New Delhi: Ahead of resumption of negotiations in Geneva to end the stalemate over the Bali agreement, India has notified its farm subsidies for six years from 2004-05 to 2010-11 to the World Trade Organization (WTO).

India claims that it has not breached the permissible subsidy levels under WTO rules.

India had not notified its farm subsidies to the WTO since 2003-04; updating the information is expected to help it answer rich nations’ complaints that it doesn’t comply with WTO notification requirements, a significant move even as it fights for a permanent solution on food subsidies.

As per the notification, in 2010-11, India’s aggregate measurement of support (AMS) for rice, or subsidy for procurement of rice, has been calculated at $2.3 billion. WTO rules allow such subsidy to be within 10% of the total value of paddy produced in the country.

Without revealing the total production figure, India has indicated to the WTO that its subsidy for rice is within the prescribed limit. The commerce ministry had earlier communicated unofficially that its AMS for rice was around 7% of the total value of paddy produced in 2010-11. India’s subsidies for wheat remained in the negative, against the prescribed limit of 10%.

Under WTO rules, the domestic price support is calculated as the difference between the fixed external reference price prevailing between 1986-88 and the minimum support price (MSP) provided by the Indian government.

India announces MSP for as many as 23 crops but the subsidy is largely restricted to paddy and wheat, where the amount of government procurement is huge.

As the government keeps increasing the MSP every year, the market-distorting subsidy limit according to WTO rules keeps increasing, too, thus threatening to breach the 10% cap prescribed by it.

Developing countries including India argue that the reference period of 1986-88 is outdated and that they need to be given flexibility to stock enough grains for the food security of millions of their poor. At Bali in December 2013, developed countries agreed to find a permanent solution to this issue by 2017, until which time member countries would not be able to challenge poor and developing countries through the WTO dispute settlement mechanism if they breached the 10% cap.

Experts believe India’s farm subsidy calculations may be contested by developed countries. “India’s subsidy notifications will be minutely scrutinised and debated. According to some estimates, India’s paddy subsidies are around 24% of the total value of paddy produced, well above the prescribed 10% limit," Devinder Sharma, a food and trade policy analyst, said.

India also notified to the WTO that its permissible farm subsidies which are exempt from reduction commitments went up to $56.1 billion in 2010-11 from $16.9 billion in 2004-05. In comparison, the farm subsidies of the US in 2009, the latest year for which it has notified data to the WTO, stood at $101 billion.

India’s input subsidies which include fertiliser and electricity subsidies almost tripled during the notification period, from $10.3 billion in 2004-05 to $29.1 billion in 20010-11.

India also informed the WTO that the farm loan waiver including provision of loan at concessional rates rolled out by the United Progressive Alliance government in 2007-08 amounted to $13.3 billion.

After the National Democratic Alliance government came to power in May, India hardened its stand on the food subsidies issue and delayed implementing the trade facilitation agreement (TFA) in July that aims to streamline goods movement across international borders. It wants a permanent solution to the food subsidy issue to be implemented simultaneously with the TFA with the latter expected to benefit developed countries more than developing ones.

Following a month-long summer break, the WTO has resumed its work in Geneva. WTO director general Roberto Azevêdo has called a head of delegation meeting on 15 September to chart out the future course of action.

WTO spokersperson Keith Rockwell said in an e-mail that Azevêdo had asked members in July to pause and reflect during the summer break on what should be the way forward. “On the 15th, the DG will ask members to share their reflections with the wider membership. In the meantime, the negotiating group chairs have already begun their consultations and will continue them throughout the month," he wrote.

On Wednesday, India’s trade minister Nirmala Sitharaman told reporters that India’s stand is now much more appreciated by WTO members and she is hopeful that a permanent solution on food subsidies issue will be simultaneously implemented with the TFA.

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Published: 11 Sep 2014, 11:39 PM IST
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