EU, Canada red-flag India’s crop cover scheme at WTO

Fresh trouble is in store for India at the World Trade Organisation (WTO), with the EU, Canada, Australia and Thailand questioning Prime Minister Narendra Modi’s crop insurance scheme for farmers. The countries have sought details from India at the multi-lateral trade forum to examine if it should be classified as a trade-distorting amber-box subsidy subject to a cap.

India is already fighting to get food procurement subsidies recognised as non-trade distorting subsidy. New Delhi can notify the scheme as a permissible and un-capped subsidy (green box) at the WTO only if it establishes that the insurance amount is payable after at least 30 per cent crop is destroyed and a natural calamity has been declared –– conditions that may not be easy to meet.

“At a recent meeting of the committee on agriculture at the WTO, Canada and the EU asked India about the crop insurance scheme and noted that it would bring down the rate of premium paid by farmers to 2 per cent. The countries want to find out if they can stop India from declaring the subsidy for crop insurance as a green-box subsidy,” a Commerce Ministry official told BusinessLine .

If India wants to give unlimited amounts of crop insurance subsidy, it has to comply with the green-box criteria, pointed out Abhjit Das from the Centre for WTO Studies.

“If not, the subsidies will be classified as amber box and clubbed with all other product-specific support, including the minimum support price programme (MSP) and subject to a cap of 10 per cent of farm production,” he said. Overshooting the 10 per cent cap may, in turn, lead to challenges and penalties.

Under the PM’s Fasal Bima Yojana (PMFBY), three levels of indemnity –– 90 per cent, 80 per cent and 60 per cent –– corresponding to low-risk, medium-risk and high-risk areas will be available for all crops based on production in the past ten years. This means farmers will have to bear the loss of the first 10 per cent, 20 per cent or 40 per cent for the different categories.

“However, there is no clause in the scheme mentioning the minimum crop loss that would make a farmer eligible for insurance pay-outs. It would depend on the assessment done by the insurance companies,” the official said. Therefore, green-box eligibility based on a minimum 30 per cent loss of income or production could be difficult to meet for the government.

The requirement for declaration of a ‘natural disaster’ in order to meet the eligibility criteria of green-box subsidy is also tricky; such declarations are usually political decisions and the government may not always want to come up with such an announcement.

The PMFBY, which will be operational from April 1, seeks to provide insurance coverage and financial support to farmers in the event of natural calamities, pests and diseases and stabilise income in distress years.

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