Context: Recently, India has appealed against a ruling of the World Trade Organization's (WTO) trade dispute settlement panel which ruled that the country's domestic support measures for sugar and sugarcane are inconsistent with global trade norms. 
Issue

• India’s Minimum Selling Price system for Sugarcane was brought to notice to the WTO by Brazil, Australia and Guatemala.
• It includes various provisions of the WTO's Agreement on Agriculture, Agreement on Subsidies and Countervailing Measures, and the General Agreement on Trade and Tariffs (GATT).
• These three countries, which are members of the WTO, had complained that India's support measures to sugarcane producers exceed the de minimis level of 10 percent of the total value of sugarcane production, which according to them was inconsistent with the Agreement on Agriculture.

Key Complaint
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.

Sugarcane Pricing in India

• Sugarcane prices are determined by the Centre as well as States.
• The Centre announces Fair and Remunerative Prices which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and are announced by the Cabinet Committee on Economic Affairs, which is chaired by Prime Minister.
• The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.

Note: Fair and Remunerative Price (FRP) is fixed under a sugarcane control order, 1966. It is the minimum price that sugar mills are supposed to pay to the farmers. However, states determine their own State Agreed Price (SAP) which is generally higher than the FRP.
Road Ahead

• Today's prices cannot be compared to prices in 1986-88. This is wrong. A larger battle has to be fought on how much price support can India give in the WTO.