Sops for skimmed milk powder exports come under WTO lens

Export incentives given to the skimmed milk powder (SMP) industry by the Centre and the Gujarat and Maharashtra governments, to help ease the glut in the domestic market, are under scrutiny at the World Trade Organization (WTO).

“Members including the EU, the US, New Zealand and Australia have asked India to explain how the move was in line with the existing agreement on agriculture of the WTO and the decision to eliminate all export subsidies,” a Geneva-based official, privy to a recent meeting of the WTO’s Committee on Agriculture, said.

In July, the Directorate-General of Foreign Trade notified 10 per cent export incentive for milk powder, under the Merchandise Export from India Scheme.

Gujarat and Maharashtra, the two leading milk-producing States in the country, too offered a ₹50,000 per tonne subsidy for exports of SMP in response to the domestic dairy sector suffering due to a sharp fall in prices due to excessive stocks. With India no longer in the bracket of economies with average yearly gross national income less that $1,000, it does not qualify for giving export subsidies according to WTO rules.

“India, defending the package announced by the two States, said financial supports provided through various State policies compensate marketing, handling, distribution and associated costs of farmers for their exports, which are allowed under WTO Agriculture Agreement Article 9, and that supports are temporary,” the official said.

Questioning the 10 per cent export incentive approved by the Centre, the US pointed out that India did not have any scheduled export subsidy entitlements. It asked New Delhi to explain how these measures were implemented and also provide the eligibility criteria.

Interestingly, the MEIS, under which the 10 per cent subsidy has been provided to dairy exporters by the Centre, is one of the five export promotion measures against which the US filed a WTO dispute earlier this year stating that they flouted multilateral rules.

New Zealand, in its submission, pointed out that Gujarat was implementing a provision of up to $44 million to support the Gujarat Milk Marketing Federation to export 60,000 tonnes of skimmed milk powder. The funding will subsidise the export of Indian skimmed milk powder and significantly impact international trade of the same, it said, seeking details including eligibility for receiving payments, the criteria for making payments and how the scheme will be implemented.

New Delhi now has to provide satisfactory answers to the queries failing which members may threaten to lodge a dispute against the measures at the WTO.

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