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  3. India reports 'no breach of limit' in farm subsidies to WTO

India reports 'no breach of limit' in farm subsidies to WTO

12 Sep 2014 Evaluate

As the developed nations raised concerns over India for not disclosing agri subsidies over the long period, the government has claimed that India's farm subsidies are well below the World Trade Organisation's (WTO) cap of 10 percent and the developed world should move ahead with finding a permanent solution for stock piling of grains for food security purposes.

India had not notified its farm subsidies to the WTO since 2003-04 and thus the US and other developed countries had alleged that India has breached the 10 percent cap. India has now filed the notification for seven years (2004-2005 to 2010-2011) to the WTO and the new updated information would ascertain the developed nations that India has complied with the WTO requirements. According to the filed notification, India’s aggregate measurement of support (AMS) for rice, or subsidy for procurement of rice, has been calculated at $2.3 billion in 2010-11. India has cleared to the WTO that its subsidy for rice is within the prescribed limit. However, India’s subsidies for wheat remained in the negative, against the prescribed limit of 10 percent. India’s input subsidies including fertiliser and electricity subsidies almost tripled during the notification period to $29.1 billion in 2010-11 from $10.3 billion in 2004-05.

With regular increase in minimum support price (MSP) every year in India, the market-distorting subsidy keeps increasing too, threatening to breach the 10 percent cap set by WTO. According to WTO rules, the domestic price support is calculated as the difference between the MSP provided by the Indian government and fixed external reference price prevailing between 1986-88. Developing countries including India argue that the reference period of 1986-88 is outdated and that they need to be given flexibility to stock enough grains for the food security of millions of their poor.  In December 2013 at Bali, developed countries agreed to find a permanent solution to this issue by 2017.

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