India’s MSP programme for Pulses under WTO Lens

· Canada, US Serve Counter-Notification to India

India’s minimum support price (MSP) programme for pulses has come under greater scrutiny at the World Trade Organization (WTO) with the US, Canada and Australia serving it a formal counter-notification, alleging that the subsidy involved was much higher than the permitted cap. The EU, New Zealand, Ukraine and Paraguay also joined the chorus against the country.

Defending itself at the agriculture committee meeting this week in Geneva, India said the calculations of MSP made by the US and Canada were incorrect and stressed that its price support programme for pulses was only to ensure nutrition supply for 195 million poor people.

The five pulses covered under MSP are chickpeas, pigeon peas, black matpe, mung beans and lentils.

“Contrary to India’s reported number of 1.5 per cent of total value of production, Canada and the US believed India’s MPS (market price support) for pulses was actually between 31-85 per cent, vastly exceeding its de minimis limits (cap) of 10 per cent of the total value of production,” a Geneva-based trade official said.

In case it is established that India’s ‘trade distorting support’ exceeds the cap, it would be forced to discontinue the support programmes, failing which it may have to pay penalties. Although India and a number of developing countries have been demanding that food procurement subsidies should not be capped, WTO members are yet to arrive at a “permanent solution” to the problem.

India has earlier been served three counter-notifications targeting wheat, rice, sugar and cotton. The US and Canada also claimed there are a set of specific methodology issues in India’s notifications that are inconsistent with WTO regulations. India reported support levels in dollars rather than rupees, included only volumes actually purchased as eligible production for the purpose of determining support levels, and failed to report total value of production, it said.

In addition, India only provided the aggregate MPS support for five pulses products without breaking down figures according to each product, it added.

Nutrition supply

In response, India said that the US and Canada’s counter-notification, co-sponsored by Australia, was based on incomplete and misleading information. “India said its minimum market price support for pulses ... was merely to ensure nutrition supply for 195 million poor people and is a very small quantity. It insisted that eligible production is only the volume actually purchased by the government,” the trade official said.

With respect to the issue of currency, India repeated that there is no obligation in the WTO in terms of the currency to be used and many members chose to report in US dollars as India did. If the complaining members are not satisfied with India’s explanations, the matter could be dragged to a dispute settlement panel.

Canada, US accuse India of ‘dramatic’ under-reporting of MSP for five pulses

Amiti Sen New Delhi | Updated on February 13, 2019 Published on February 13, 2019

Submit paper saying support levels are multiple times higher; call for discussion

Canada and the US have accused India at the World Trade Organization (WTO) of “dramatic under-reporting” of market price support for pulses — chickpeas, pigeon peas, black matpe, mung beans, and lentils — and have submitted their own steeper calculations for scrutiny of members.

India’s minimum support price (MSP, also referred to as market price support) for the five pulses is about 26 times higher at ₹69,923 crore instead of the notified ₹2,667 crore, as per a joint submission made by the countries to the WTO on Tuesday.

“It appears that India’s market price support for pulses is vastly in excess of what it has reported to the WTO. Canada and the US look forward to future discussion of the significance of India’s market price support for pulses for both India’s market and for world markets — both with India and with other members,” the submission said.

It is important for India to defend its own calculation of MSP as it is classified as ‘trade distorting support’ at the WTO which is capped at 10 per cent of production value. In case India’s ‘trade distorting support’ exceeds the cap, it will either be forced to discontinue the support programmes, failing which it may have to pay penalties.

Difference in calculation

The main reason behind the stark difference in the MSP figures for pulses notified by India and those calculated by Canada and the US is the fact that the latter have based their calculation on all eligible production, as opposed to just that portion of production actually procured by government entities in India.

“India’s reporting of only procured quantities is directly contrary to the MSP calculation methodology provided in the Agreement on Agriculture…which provides for the calculation to be based on all production eligible for the applied administered price, whether or not actually procured by a member’s government at that price,” the two justified in their submission.

India, however, has consistently maintained at the WTO that “eligible production” for MSP must be that part of the total production of a crop that is actually procured by the agencies and nothing more as the support to farmers is only restricted to that amount. It is expected to continue this line of argument at the Committee on Agriculture of the WTO.

Another essential difference in the calculation methodology is that while India has made its MSP calculations in US dollar, Canada and the US have calculated it in Indian rupees. New Delhi had earlier argued that the AoA gives members the freedom to use the US dollar (which insulates the figures against rupee depreciation) and it has been consistently reporting its calculations in the American currency.

The total MSP for pulses calculated by Canada and the US include ₹21,795 crore for chickpeas (gram), ₹22,040 crore for pigeon peas (arhar/tur), ₹10,300 crore for mung beans (moong), ₹12,909 crore for black matpe (urad), and ₹2,877 crore for lentils.