India hits back in WTO over allegations that it supports domestic farmers more than permitted

Five countries led by US estimate that India provides support to its rice and wheat farmers ‘vastly in excess’ of what it reports to WTO. India has refuted all allegations.

File photo of World Trade Organisation HQ in Geneva | Courtesy: WTO

New Delhi: India has hit back at some member countries of the World Trade Organization (WTO), led by the US, that have accused it of providing its rice and wheat farmers a much higher level of support than is permissible under WTO rules. During a WTO meeting last week, India categorically rejected the calculations made by the member countries. 

The meeting of the WTO Committee on Agriculture, which took place over 26-27 November also saw several member countries questioning India’s rice exports bans, subsequent partial lifting of the bans, and India’s failure to inform WTO about either, despite the rules mandating that it must.

In the run-up to the meeting, the US, leading a group including Argentina, Australia, Canada, and Ukraine, submitted a joint ‘counter-notification’ to the committee that showed that, during 2021-22 and 2022-23, India provided its rice and wheat farmers “significant market price support” both in terms of absolute values as well as a percentage of value of production.

“It appears that India provides market price support for rice and wheat vastly in excess of what it has reported to the WTO,” the counter-notification said. 

Adding, “India’s apparent MPS (market price support) for rice appears to have been over 87 percent of VoP (value of production) in each of the two covered years for which India has notified data. Its apparent MPS for wheat appears to have ranged between 67-75 percent of VoP over the two covered years.”

India hits back

According to WTO rules, the level of MPS permitted for developing countries is 10 percent of their value of production. 

India’s official notification to the WTO about its MPS activities showed that it had exceeded this limit in the case of rice, albeit by a much smaller amount than what the US-led group accused it of. 

The country’s official submissions for 2021-22 and 2022-23 showed that its MPS for rice stood at 15.22 percent and 12.10 percent. For wheat, it was 0.9 percent and 0.02 percent over the same period.

“India rejected the counter-notification as a baseless accusation, defending its compliance with WTO obligations and highlighting unclear or absent definitions in the Agreement on Agriculture regarding certain elements of notification calculations,” the Committee on Agriculture noted in a document following the meeting. “It [India] also criticised the reliance on outdated reference prices and emphasized the need for their update.”

“Additionally, it [India] urged co-sponsors to prioritise submitting their overdue notifications rather than engaging in counter-notification exercises,” the document added.

Why India’s calculations are different

The ‘co-sponsors’ of the counter-notification—countries that backed it—noted several reasons why their estimates differ from India’s.

A major reason, according to them, was the manner in which India calculates the amount of foodgrain on which price support is applicable. 

While India includes only procured quantities of foodgrains in its calculations, WTO Agreement on Agriculture rules say the calculation must be based on all production eligible for market support, whether or not it is actually procured by the government at that price. 

In other words, while the Indian government may not procure the country’s entire output of rice and wheat, the Minimum Support Price (MSP) it imposes on these crops is applicable on even amounts it did not procure. Therefore, even this amount should be included in the calculation of the support that the government provides, the co-sponsors argued.

The other major reason for the discrepancy was intervention of various state governments, which the Indian government does not include in its calculations. 

“It appears that India’s domestic support notification of market price support, including for rice and wheat, reflects only the national MSP and not any additional state bonuses that further increase the MSP provided to farmers,” the counter-notification said. “Rice and wheat procured by the government in specified states was purchased from producers at the announced MSP plus the announced state bonus, which appears to effectively increase the floor price in those states.”

WTO member countries seek basic information

In October this year, India lifted all restrictions on export of most varieties of rice that had been in place since September 2022. 

However, it retained the ban on the export of broken rice. 

In the meetings following India’s imposition of the rice export bans, WTO members have consistently been asking India for basic information about the restrictions, such as how long they will be in force, why they were needed, when WTO would be officially informed about them, and why member countries were not provided prior notice.

Several of these countries had similar questions even now that most of the restrictions have been lifted, which they posed to India during the latest meeting. 

The UK, the US, Switzerland, Australia, and Japan, for instance, asked India what changes to its rice export restrictions actually were, and “if India is planning to inform WTO members in advance before taking similar measures in the future and submit the relevant export restriction notification to members”.

The US, Japan, and Australia even pointedly asked India to explain why it “has not been able to submit timely and accurate notifications with regards to export restrictions on rice and rice products”.

(Edited by Amrtansh Arora)