Economy

Cotton MSP has not breached WTO cap, argues India

Amiti Sen New Delhi | Updated on June 21, 2021

India believes it is unfair to calculate MSP support based on quantities that have not been procured by the government   -  REUTERS

Australia asks India to explain the variation in figure for ‘eligible production’ used to calculate MSP

India has stated that its price support for cotton has not exceeded the de-minimis subsidy limits determined by the WTO. The clarification was in response to queries on the country’s total cotton production and support posed by Australia at a recent Committee on Agriculture meet, a Geneva,-based official has said.

Australia, however, demanded that India provide all relevant data on the value of cotton production to confirm that de-minimis limits (subsidy limit fixed at 10 per cent of production value) were not being breached and also explain why there was a variation in the figure of eligible production (cotton eligible for MSP).

“India also received questions on its reported domestic support for rice, public stockholding, and other support measures as well as on alleged inadequate information provided on its quantitative import restrictions on pulses and its public stockpiling,” the official added.

Australia’s contention

On the issue of support for cotton, Australia noted that from 2017-18 to 2019-20, eligible production under the MSP programme for cotton in India increased from 0.07 million tonnes (mt) to 1.79 mt. India’s support for cotton thus increased steeply from $14.83 million to $ 184.83 million, it pointed out, adding that the applied administered price also increased by $270 per tonne.

It also brought to the notice of the CoA that the US had issued a counter notification on November 9, 2018 indicating that India had provided market price support for cotton in excess of its de minimis limits.

Australia, therefore, said that India should shed light on the value of cotton production and explain the reasons for variations in eligible production and confirm that ceiling limits were not breached, the official added.

It is important to stay within de-minimis levels as breaching it could lead to penalty. India can use a ‘peace clause’ to avoid such action, but it is subject to a number of complicated requirements and prone to challenge. Indian officials had earlier explained that for calculating support prices India took stock only of the amount that was being procured by the government at administered prices and not the total production. “Countries like the US and Australia have been insisting that the value of price support should be based on the entire crop as technically it was all eligible for support. But India’s argument is that only the amount that was procured mattered as price support was extended only to that portion. This needs to be thrashed out at the WTO as it could lead to more trouble for India in the future,” the official said.

Because of this difference in consideration of eligible production for calculating MSP, some countries such as the US allege that New Delhi has not just breached the de-minimis levels for rice (as duly notified by the country) but also for other farm products such as wheat and cotton.

India believes that it is unfair to calculate MSP support based on quantities that have not been procured by the government as farmers did not get any support price for such produce.

As part of a permanent solution on public stockholdings, India wants the WTO to exclude MSP from de-minimis limits or change the methodology of its calculations to make it more realistic and supportive towards poor farmers.

Import curbs

On import restrictions on pulses, the EU and Canada joined the US and Australia in criticising the lack of information provided by India in its answers overall.

The EU, Canada and the US had asked India to explain how it decides on imposing or removing quantitative restrictions on import of pulses.

Published on June 20, 2021

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