Farmers Protest 2.0: Government Grapples With WTO Pressure Amid Demands To Legalise MSP

As farmers continue with their protest demanding legalising minimum support price (MSP) among other things, the government has found itself on crossroads as pressure builds up on India's farm subsidies at the World Trade Organisation (WTO).

As reported by Indian Express, an influential group of 19 agricultural exporting nations, led by the Cairns Group, has targeted India's public stockholding programme, claiming it distorts global food prices and undermines food security in other countries.

However, India, seeking greater flexibility to provide farm support, is pushing for a permanent solution at the upcoming inter-ministerial summit in Abu Dhabi, from 26 to 29 February.

Last year, the group circulated a detailed proposal to slash trade-distorting farm support in WTO members.

This triggered tensions among developing nations including India. 

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While India’s per farmer subsidy is abysmally low compared to countries such as the US, the WTO rules do not consider subsidies on a per-farmer basis.

Experts suggest that acceding to farmers' demands for an MSP law could exacerbate matters, potentially breaching subsidy limits and inviting WTO scrutiny.

Notably, “WTO norms don’t restrict us from providing high MSP. Because of the peace clause there is no restriction on what should be the level of MSP or the level of procurement. But there is no 100 per cent legal certainty. We are questioned at WTO and that is why we are trying to seek a permanent solution,” Abhijit Das, expert on international trade and the former head, Centre for WTO Studies said.

Das further explained that farmers groups have stated that agriculture should be taken out of WTO, but that approach could pose problems and would restrict India and other developing nations from disciplining the subsidies being given by the developed world.

Experts have also flagged that there will be materially high expenditure if the government agrees to the farmers demand for a MSP law.

“Considering the government will procure only crops trading in mandis below the MSP, our calculations show it will need a working capital of Rs 6 lakh crore in marketing year-2023,” Pushan Sharma, Director-Research, CRISIL Market Intelligence and Analytics said.

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