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India’s agricultural subsidies have been criticized globally for creating unfair market advantage. Examine in the context of sugar and sugarcane subsidies.
India’s agricultural subsidies have been criticized globally for creating unfair market advantage. Examine in the context of sugar and sugarcane subsidies. (200 words)
Subsidies are monetary compensation or support provided by the state to reduce cost of production. India provides subsidies to many sections including farmers. The move of providing agricultural subsidies is not always legal in WTO context.
Recent incident
- Countries like Brazil, Guatemala and Australia had complained to the WTO that India was giving support to producers of sugarcane and sugar.
- WTO was forced set to up to study the relevant provisions of the covered agreements cited by the disputing countries.
Complaints against India
- India’s subsides were violation of WTO’s Agreement on Agriculture and the Agreement on Subsidies and Countervailing Measures (SCM), and Article XVI of the General Agreement on Trade and Tariffs (GATT).
- India provides domestic support to sugarcane producers that exceed the de minimis level of 10% of the total value of sugarcane production.
India’s arguments
- India argues that the requirements of Article 3 of the SCM Agreement are not yet applicable to India and that it has a phase-out period of 8 years to eliminate export subsidies.
- There was also the argument that mandatory minimum prices are not paid by the central or state governments but by sugar mills.
Road ahead
- Lower taxes
Taxes on export can be cut to reduce the prices instead of giving direct cash benefits in form of MSP. This is acceptable and also allows increase in India’s agricultural exports.
- Easy facilitation
Facilitating trade of commodity can serve farmer community on the longer run. This includes providing free warehouse facilities, transport, branding etc.
Thus, subsidies are necessary for farmers who are dependent on agriculture for their livelihoods. But it is better that government give support for crop diversification.
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