From UPSC perspective, the following things are important :
Prelims level : Sugarcane pricing mechanism
Mains level : Issues with Sugarcane Pricing
A World Trade Organization panel ruled that India violated international trade rules when it offered excessive subsidies for the production and export of sugar and sugarcane.
What did WTO say?
- Under WTO rules, India’s sugar subsidies are capped at a de minimis limit of 10% of the value of production.
- India’s policies were inconsistent with WTO rules that govern the levels at which nations can subsidize domestic agricultural production.
- WTO has asked it to withdraw its prohibited subsidies under the Production Assistance, the Buffer Stock, and the Marketing and Transportation Schemes within 120 days.
What was the complaint against India?
Australia, Brazil, and Guatemala said India’s domestic support and export subsidy measures appeared to be inconsistent with various articles against WTO’s:
- Agreement on Agriculture
- Agreement on Subsidies and Countervailing Measures (SCM)
- Article XVI (which concerns subsidies) of the General Agreement on Trade and Tariffs (GATT)
- Domestic Support: All three countries complained that India provides domestic support to sugarcane producers that exceed the de minimis level of 10% of the total value of sugarcane production.
- Various subsidies: They also raised the issue of India’s alleged export subsidies, subsidies under the production assistance and buffer stock schemes, and the marketing and transportation scheme.
- Notifying support: Australia accused India of “failing” to notify its annual domestic support for sugarcane and sugar subsequent to 1995-96, and its export subsidies since 2009-10.
India’s reply to WTO panel
- India rejected the panel’s findings as “erroneous”, “unreasoned”, and “not supported by the WTO rules”.
- It argued that the requirements of Article 3 of the SCM Agreement are not yet applicable to India.
- It has a phase-out period of 8 years to eliminate export subsidies under the agreement.
- India also argued that its mandatory minimum prices are not paid by the governments but by sugar mills, and hence do not constitute market price support.