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Source: This post on Legalising MSP in India has been created based on the article “India faces WTO pressure on farm subsidies amid protests for minimum support price” published in “Indian Express” on 15th February 2024.
UPSC Syllabus Topic: GS Paper 3 Agriculture – Issues related to direct and indirect farm subsidies and minimum support prices.
News: The article discusses the issues with legalising MSP in India.
Background:
The government is left with less options to fulfill the demand of the protesting farmers for a legal guarantee of Minimum Support Price (MSP), given the latest attack by an influential group of 19 agri exporting countries.
The Cairns Group – comprising Australia, Brazil and Canada among other members — have claimed that India’s public stockholding (PSH) programme is highly subsidised. So, the farm support that India gives is distorting global food prices and hurting food security of other countries.
What is the WTO ‘Peace Clause’?
Currently, India cannot be dragged into a dispute over its subsidies as it is protected by the ‘Peace Clause’ that was agreed during the Bali ministerial in 2013.
However, India is open to face disputes. Because of the peace clause there is no restriction on what the level of MSP or the level of procurement should be.
What are the issues with legalising MSP?
1) WTO Compliance: If new schemes are to be implemented, then for those products India will have to comply with the 10% subsidy ceiling (under WTO’s Agreement on Agriculture) and it will not be protected under the ‘Peace Clause’.
This means that an MSP law will not be covered under the peace clause that gives India protection from legal disputes at the WTO.
2) High Burden on Exchequer: Experts have pointed out that there will be materially high expenditure if the government agrees to the farmers’ demand for an MSP law.
Note: India’s per farmer subsidy is very low. However, WTO rules are not based on per-farmer subsidy. India’s subsidy to farmers comes in at $300 per farmer, compared to $40,000 per farmer in USA.
Question for practice:
What are the issues with legalising MSP in India? Discuss in the context of the WTO Agreement on Agriculture.
