US, EU question India on its recent move to increase MSPs for Kharif crops

The US has questioned India at the WTO on its move to increase minimum support prices (MSPs) for kharif crops in the current year and asked India to confirm whether one of its objectives is to limit imports of pulses.

In a Committee on Agriculture meeting held on 9 November, the US questioned India on its 1 June decision to increase MSPs for 14 kharif crops and the farmer-friendly initiative of a bonus over and above the MSP for 2015-16 kharif crops and 2016-17 rabi crops.

The US asked India to confirm whether one of the main objectives of further increasing the MSP for pulses and oilseeds is to limit imports of the goods, whether India has set procurement targets for pulses and oilseeds in 2016, whether it expects to procure any pulses and oilseeds, and what its procurement targets were for the 14 commodities.

 US, EU question India on its recent move to increase MSPs for Kharif crops

Representational image. Reuters

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, had given its nod for the increased MSPs for kharif crops, which has been effective from October, based on recommendations of Commission for Agricultural Costs and Prices (CACP).

The CACP is an expert group that recommends prices of agricultural commodities after considering variables such as the cost of production, overall demand and supply of the commodity, domestic and international prices, among other considerations.

The increased MSP is intended to narrow the gap between demand and domestic supply of pulses and oil seeds – resulting in soaring dal prices due to scanty rainfall – by spurring investment and production through guaranteed remunerative prices to farmers.

The CCEA also gave a bonus to some kharif crops of the 2015-16 season and some rabi crops of the 2016-17 season. Kharif crops, which are grown during the monsoon in South Asia, include paddy, maize, millet and cotton crops.

India said that its main objective for increasing MSP for pulses and oilseeds was to cover the increasing gap between the demand for, and domestic supply of, these crops. Also, leguminous pulses have salutary environmental benefits consuming less water and reducing soil degradation. MSPs are intended to reduce distress sales by poor farmers, and that most of the commodities covered by MSPs have a market price much above the fixed MSP, and so the government is not required to make any procurement or set any targets, India argued.

The US, in turn, said that given India doesn't expect government procurement of pulses or oilseeds as a result of the announced MSP for 2016, how does India justify not notifying support of commodities with the MSP and no procurement when the CCEA statement and others clearly indicate that the June announcement is intended to give "strong signals" to producers to grow the covered crops.

The EU said that it had the same concerns as the US on the matter, while Canada said it had an interest in the issue given that it was a large exporter of pulses and oilseeds.

In the same meeting, the EU questioned the Maharashtra government’s attempts to control the free fall of onion prices – due to excess supply and unsold stocks that had led to protests by farmers.

“We also have proposed to pay Rs 10 per kg for onion exports and want to export out 25 lakh tons from the country,” Minister of Cooperation of Maharashtra Subhash Deshmukh had said in August.

The EU had asked India to confirm whether it had proposed to put in place an export subsidy program for onions and to provide more information – like duration, total amount of subsidy, subsidy rate per ton, etc — on the announcement.

It also asked India for an explanation of how this conforms to Article 20 of the Nairobi Decision on Export Competition since exports of onions are subject to state trading through the state agricultural marketing board.

Article 20 through a decision of 19 December 2015 taken during the WTO ministerial conference in Nairobi states “members shall ensure that agricultural exporting state trading enterprises do not operate in a manner that circumvents any other disciplines contained in this Decision”.

The EU asked India to explain the state of preparations for the MSP-for-onions program that India is believed to be working on.

India said that the information is being collected and will be shared in due course. The EU, the US, Canada, Ukraine and New Zealand said that they look forward to India's reply.

Additionally, the EU questioned India on its export restrictions on sugar and its  new crop insurance scheme, New Zealand questioned India on its importation of apples and Australia questioned India’s sugar export subsidies. These issues, however, have been raised in previous meetings as well.

The Committee on Agriculture chairperson, Canadian diplomat Garth Ehrhardt, also said during the meeting that members had not provided any information in the context of the monitoring foreseen under the Bali decisions on public stockholding for food security purposes and tariff-rate quota administration.

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Updated Date: Nov 11, 2016 16:44:04 IST