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Resource centre on India's rural distress
 
 

The WTO’s challenge to MSP is another frontier to cross -Prabhash Ranjan

-The Hindu

The need is to convince farmers of other effective policy interventions that are World Trade Organization compatible

The demand of farmers to provide a legal guarantee for the minimum support price (MSP) for their produce has triggered a nationwide debate. Some believe it would be “fiscally ruinous” to procure all the 23 crops for which MSP is announced annually. Others contend that procuring these crops would be a logistical nightmare. There is yet another dimension of this debate that has largely gone unnoticed. Can India provide a legal guarantee for MSP without violating its international law obligations enshrined in the Agreement on Agriculture (AoA) of the World Trade Organization (WTO)?

As a trade-distorting subsidy

One of the central objectives of the AoA is to cut trade-distorting domestic support that WTO member countries provide to agriculture. In this regard, the domestic subsidies are divided into three categories: ‘green box’, ‘blue box’ and ‘amber box’ measures. Subsidies that fall under the ‘green box’ (like income support to farmers de-coupled from production) and ‘blue box’ (like direct payments under production limiting programmes subject to certain conditions) are considered non-trade distorting. Countries can provide unlimited subsidies under these two categories. However, price support provided in the form of procurement of crops at MSP is classified as a trade-distorting subsidy and falls under the ‘amber box’ measures, which are subject to certain limits.

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