WTO ruling puts question mark on continuation of FRP for cane, India plans to appeal against it

A WTO panel has opined that the Centre’s FRP, as well as the higher State Advised Prices (SAP) for cane fixed by Uttar Pradesh, Punjab and Haryana, are in violation of the permitted limits of domestic support under the Organisation’s Agreement on Agriculture.

Released on December 14, the WTO panel’s report seeking withdrawal of sugar export subsidies by India has made headlines, but it’s the ruling on cane FRP and SAP that is likely to affect cane farmers. Although neither the Centre nor state governments procure cane — the responsibility to pay MSP (as FRP or SAP) lies solely with sugar mills as per the Sugarcane Control Order under the Essential Commodities Act — the panel’s report has said that such domestic support to growers is inconsistent with India’s obligations under Article 7.2 (b) of the WTO’s Agreement on Agriculture. The section governs domestic support given to agriculture and limits the same to 10 per cent of total Aggregate Measure of Support (AMS), and aims to provide a level playing field.

The report pointed out that India, in 2018-19 alone, paid Rs 1,111,065.83 million worth of AMS to sugarcane producers, as against the permitted limit of Rs 123,049 million. This ruling comes even as the central government has proposed the setting up of a committee to find ways of making the MSP system more effective and transparent.

Farm organisations, under the umbrella of the Samyukt Kisan Morcha, which spearheaded the more than year-long movement for rollback of the Centre’s now-repealed three agriculture reform laws, are demanding that MSPs be made legally enforceable.

The Centre currently declares MSPs on 23 crop. Of these, sugarcane is the only one in which farmers are assured of FRP/SAP payment within 14 days of purchase by mills.

Farmer leader Raju Shetti has urged the central government to strongly oppose this ruling, and even exit WTO if the ruling stands.

Shetti, a former member of Parliament, said the ruling should be challenged by the central government immediately. “FRP is already a legal right of cane farmers. The central government should present a strong case before the appellate authority of the WTO,” he said.

In case the ruling is not withdrawn, Shetti said India “should even pull out of WTO”.
Meanwhile, the Centre has already promised to challenge the WTO panel’s findings, said Abinash Verma, director general of Indian Sugar Mills Association and Prakash Naiknavare, managing director of National Federation of Cooperative Sugar Factories Federation.

“The appellate body is yet to be constituted and the proceedings will take time. The industry is working closely with the government to counter the ruling and we are hopeful that we will be able to overturn it successfully,” they said.