International Relations

WTO Challenge to India on MSP Programs for Food Grain

  • India has been chastised by the World Trade Organization (WTO) for failing to adequately address member concerns about its Minimum Support Price (MSP) programmes for food grains, especially rice. WTO members such as the United States, Australia, Canada, the European Union, and Thailand have claimed that India did not provide adequate answers during consultations.
  • These nations claimed that the MSP programmes had exceeded prescribed subsidy limits and were being investigated by the WTO.
  • With this decision, India became the first nation to use the Bali ‘peace clause’ to justify exceeding its 10% rice support limit in 2018-2019 and 2019-2020.

What exactly is the ‘Bali Peace Clause’?

  • The minimum support price (MSP) in India is classified as an amber box subsidy.
  • India has exceeded its limits for amber box rice subsidies for two straight years, prompting a WTO challenge.
  • The ‘peace clause’ in Bali permits developing countries to exceed their 10% limit without fear of legal repercussions from other members.
  • However, it is subject to a number of conditions, including not distorting global commerce and not jeopardising other members’ food security.
  • The ‘peace clause’ applies to India’s MSP programs, but some WTO members have accused India of failing to include all necessary information in its notifications on a regular basis.

India accused of inadequate reporting

  • WTO members have accused India of failing to disclose all public stockholding programmes covered by the “peace clause.”
  • Some members have noted that India does not have a sufficient monitoring system in place to ensure that no stocks are exported.
  • India, on the other hand, claims that it is not required to inform any public stockholding programmes other than those for crops where subsidy limits have been exceeded.

The Effect on India’s MSP Programs

  • WTO members’ criticism may have an impact on India’s MSP programmes for food grains, especially rice.
  • The ‘peace clause’ conditions may restrict India’s ability to exceed subsidy limits and support its farmers.
  • To resolve the concerns of other members and guarantee compliance with WTO regulations, India may be required to provide more detailed notifications and monitoring mechanisms.

Why is India maintaining its MSP stance?

  • Climate change, soil degradation, and water scarcity are among the issues confronting India’s agricultural industry.
  • The nation also has to deal with farmers’ distress as a result of low produce prices, which is why the MSP programme was created in the first place.
  • The WTO’s challenge to the MSP programme may exacerbate the problems encountered by Indian farmers.
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