India rejects US charge of subsidising cotton beyond WTO spending limits

India has rejected the US charge of subsidising cotton beyond the limits prescribed by the World Trade Organisation (WTO), saying its market price support is intended to help the country's poor farmers, an official said.

The US has alleged that India was providing substantial market price support for cotton well in excess of India's WTO spending limits.

India's policies for supporting its cotton and sugar sectors were under the spotlight in a meeting of the WTO's Committee on Agriculture on November 26-27. Australia too had raised the issue.

"The support provided (by India) is intended to ensure that poor farmers do not resort to sales under distress and that procurement by government agencies only accounts for a very small part of total production (less than 2 per cent)," a Geneva-based official said.

India has been using a consistent reporting approach since 1995 and it uses a robust methodology as compared to the US in its calculation of the support.

India's figures on total value of production are publicly available and they do not include it in WTO notifications because it is not required and other members also do not report this figure.

"The method used by India is consistent with WTO rules," the official added.

The US had alleged that India was substantially under-reporting the value of its minimum price support (MPS) for cotton.

They had stated that in its 2015-16 notification to the WTO, India reported Rs 1.2 billion in MPS for cotton whereas the US estimated India's support at over Rs 504 billion.

These actual support levels also mean that India is well in excess of its WTO spending limits on cotton support, which is fixed at 10 per cent of the total value of overall production, the US had alleged.

Similarly, India has also rejected Australia's claim that India's market price support for sugarcane is in excess of its WTO spending limits.

"The entire Australian counter-notification is based on a fallacious approach...In fact, MPS for sugar does not qualify as domestic support as there is no procurement by the government," the official said.

India has stated that the fair price announced is intended to prevent distressed sales of sugar by domestic farmers.

India is a marginal player in the international market for sugar and accounts for less than 1 per cent of global sugar exports.

The country has made no contribution to the glut that is currently depressing prices, India has claimed.

Australia in a communication to the WTO has alleged that India is the world's second largest sugar producer and fourth largest exporter and the dynamics in India's sugar market have significant implications for both prices and trade in the global market.

They have alleged that India has provided support for sugarcane over a six-year period vastly in excess of its WTO spending limits.

According to them, the support provided by India topped Rs 747 billion in the 2016-17 market year.

Other countries that raised red flags over India's support to the sugarcane sector include Guatemala, Thailand, Paraguay, Brazil and European Union.

In the meeting, questions were also raised regarding India's decision to increase import on milk powder from 30 per cent to 40 per cent.

India has replied that the measure was based on domestic demand and supply and the new duty was within India's bound tariff limit (the maximum permitted tariff in India's WTO schedule of commitments).

The EU said this was an example of India restricting trade by raising import duties.