Understanding the MSP Issue, India and WTO

One of the farmer leaders called for India to exit the World Trade Organisation. India is engaged in tactical bargaining at WTO to retain minimum support price (MSP). The WTO is desperate to reach outstanding issues of the current Agreement on Agriculture while many ordinary supporters of farmers are accusing the Indian Government of siding with corporates. In this article we explore the facts and how each is stuck in a complex muddy field from which there are few ways out.

Let us start with MSP, or Minimum Support Price. A simple fact of agriculture is that farming is no longer a subsistence occupation. Subsistence farming used natural fertilisers such as manure and farmers practised crop rotation, keeping the soil healthy. Farmers mostly produced for themselves and sold some in the market.

However, as population and life spans grew in India, traditional farming could not meet the growing demand. India had to go to international markets to buy staple foods such as grain and rice to feed its population. Often, India didn’t have enough money and borrowed it or went with a begging bowl for cheaper grain. It was ridiculed and was open to pressure by donor countries. An empty stomach is at the mercy of the provider.

The Green Revolution was a kick-start to move towards food security and self-sufficiency. The prerogative was to produce enough basic foods to feed all of India and keep enough in store for difficult times and even export. India was willing to subsidise this juggernaut of self-sufficiency drive. It changed small farmers to become small commercial farmers.

Farmers now use nitrogen-based fertilisers, all year supply of water with ever deeper mechanised wells (tube wells), and seasonal labour. Now they farm to sell rather than just feed the family. They have mostly abandoned rotation farming, growing 2-3 crops a year on the same plot of land, almost sucking life out of the land.

The inputs such as water, diesel, electricity, labourers, seeds, fertilisers, pesticides, hiring tractors or owning one on hire purchase etc all amount to considerable expense. India’s farms are small, with about 86% of farms ranging from 1-3 acres. They are family owned.

There are about 125 million farmers in India. About 58% of the Indian population depends directly or indirectly on farming sector with jobs ranging from farmer, farm labourers, traders, labour for traders, truck drivers, assistants and so on.

The Government provides many support structures and incentives, such as a well-developed procurement system called the mandi system. The Government buys the grain from farmers and ensure a minimum price so farmers can make profit. This is called Minimum Support Price or MSP. Usually it is direct input costs, called A2 and others such as unpaid family time, labelled as F1 plus 50% to 85% top up, depending on the crop, to make farming viable for the family. There was meant to be another factor called C2 which is unpaid rental and interest on fixed capital of the land. This has not been instituted. Farmers still find it difficult to make a reasonable living.

ALSO READ: Understanding the Mandi System in India

In theory, MSP is given to 22 crops products listed as essential commodities. But in reality only a few products get it and not all states provide it. It is mainly Punjab, Haryana and some parts of Himachal Pradesh. Rice and wheat are among leading crops that the Government pays for.

The road to food security is expensive but the country has become self-sufficient. It no longer goes with the begging bowl for basic foods such as rice and grain. In fact it has the capacity to export them.

The alternative is to buy basic foods in the international market from countries like Canada, Australia, United States and some other countries. Farms in these countries are an average 400 acres and in Australia can be as large as 25,000 acres. By economies of scale, these farms can buy fertilisers cheaper, have few labourers per acre of land and much fewer machinery per acre. Only a few tractors are needed for a 400 acre farm, whereas in India every 3 acre farm has to hire a tractor, wait their turn to hire or buy a tractor for their small farm.

It is not difficult to understand why cash crops can be produced cheaper by these countries with larger farms. The farms are bigger partly because these are the new worlds where land was plenty. In India and Africa, farming has been in families for centuries if not thousands of years.

If India buys on the open market and stops subsidising its farming, it will be open to the uncertainties of international politics. Other countries could demand more than money in return for selling cheaper wheat. The recent Ukraine conflict has shown how African countries dependent on Ukrainian wheat nearly faced starvation until Russia stepped in.

The other alternative is for India to go the way of some western countries and drive small farmers out in favour of large corporate Agri Business as USA did. Subsidies can be smaller and production can be cheaper with overheads spread over large area. However, that also means over a 100 million of not more farmers thrown into the job market without any jobs available. And another 300 to 600 million people dependent on the farm sector being made jobless. Politically, it will be suicide for any party to go down this route and nationally there could be unrest with nearly 50% of the population unemployed. MSP supported farming can be considered to be a form of indirect social security for farmers in return for ensuring food sovereignty.


However, India faces another pressure, the World Trade Organisation or WTO. It took over from GATT, the General Agreement on Trade and Tariffs, in January 1995. WTO is market orientated and concerned about ensuring international trade being conducted fairly and competitively. It does not like subsidies which it calls market distortion. And it also negotiates and sets limits on tariffs which are taxes on imports.

Distortions occur if two countries, A and B manufacture the same product, for instance a ceramic plate. If production costs in country A is ₹10 a plate and in country B it is ₹8 a plate, then country B is likely to be able to sell more of it. However, country A may decide to subsidise every plate by ₹5 and thus enable the manufacturer to sell for ₹5 on the international market, undermining country B. This is distorting the market with a subsidy.

On the other hand, country A may decide that any plates imported from country B will be taxed ₹5. This pushes the price of country B plate ₹to 13. This will ensure that people in country A will buy the plates made by their own country at ₹10 rather than ₹13 a plate from country B. This is called protective measures and also distorting the market.

The Agreement on Agriculture (AOA) first came into force on 1st January 1995. It sought to put limits on subsidies. The AOA has three categories of subsidies. Green subsidies are permitted in fields such as training for farmers, which does not distort the market. Amber Box subsidies are market distorting subsidies. It was agreed that developed countries such as Canada, USA etc can give up to 5% subsidy. Developing countries such as India, China and most of the South can give up to 10% subsidy. The Blue box subsidy is where State subsidises to prevent over production and thus stop market distortion. This could be putting limits on production or giving money for uncultivated land set aside for environmental purposes.

The 5% subsidy for developed countries is a lot of money for a farmer with 400 acres. However 10% subsidy for a farmer with 3 acres of land does not make farming viable. India has been defying this by giving 50% to 85% subsidies. Clearly, WTO is not happy. Or rather some countries in WTO are not happy.

A group of 17 countries, known as the CAIRNS group, want WTO to impose these subsidy limits on countries like India. Leading them are Canada, Australia and USA. Australia brought a case against India on its 85% sugarcane subsidy. India lost that.

USA, Canada and Australia particularly want to bring a case on wheat subsidy in India. These countries know that the agriculture sector could collapse in India and India may be forced to buy wheat from them. They want to penetrate the big Indian market.


Under Dr Manmohan Singh and now Narendra Modi, India has resisted this pressure. India wants WTO to allow it to continue with high subsidies. Its food sovereignty depends on that. The Modi government has been withholding consent on some other agreements until these concessions are agreed, particularly on tariffs for e-commerce. In the current 2024 round at Abu Dhabi, Piyush Goyal, the Industry and Commerce minister, scuppered any agreement on fishing stocks as India cannot afford not to give subsidies to fishermen and farmers.


There has to be 100% consent for a WTO agreement to become binding. India will no doubt continue to resist any pressure to reduce subsidies. One way forward is for the Agreement on Agriculture to come out of WTO and be handed to UNCTAD, the United Nations Conference on Trade and Development. WTO is not obliged to be cognisant of human rights, sustainable development goals, right to family life, right to education etc as it is not a UN body. But UNCTAD is a UN body and its policies and agreements have to align with those conventions.


Some farmers are arguing that there should be MSP for all crops. This is not feasible and is not really part of a food sovereignty approach. The Government is mindful of the impact on environment and water. Farmers and Indian government need to work together internally to achieve sensible policies and internationally to force changes at WTO or take Agreement on Agriculture out of WTO.

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India Australia bilateral Trade

India, Australia Discuss Ways To Boost Bilateral Trade

Union Minister of Commerce and Industry Piyush Goyal and Australia’s Minister for Trade and Tourism Don Farrell met on Sunday to discuss steps for further enhancing the bilateral economic relationship.

According to a joint statement, they discussed implementation of the Economic Cooperation and Trade Agreement (ECTA), negotiations for the India-Australia Comprehensive Economic Cooperation Agreement (CECA) and further developing two-way investment.

Last year, on December 29, India and Australia implemented an economic cooperation and trade agreement (ECTA) and are now negotiating to expand its scope for the CECA.

Ministers also discussed engagement in the G20, the Indo-Pacific Economic Framework (IPEF) and the World Trade Organization (WTO).

The Ministers noted that Prime Minister Narendra Modi and Prime Minister Anthony Albanese look forward to swift progress in negotiations and for an early conclusion of an ambitious CECA, which will build on the foundation laid by the ECTA, including new areas of trade, investment and cooperation.

According to the joint statement, CECA will create new employment opportunities, raise living standards and improve the general welfare in both countries. Ministers look forward to concluding CECA as soon as possible, are pleased with the progress resolving various bilateral technical market access issues and look forward to continuing engagement.

Minister Farrell reiterated Australia’s strong support for India’s G20 Presidency. They agreed that the G20 needs to help the world navigate a pathway back to strong, sustainable and inclusive growth, including accelerating progress to achieve the Sustainable Development Goals.

Further, ministers reaffirmed the importance of the multilateral trading system, with the WTO at its core. They agreed to build on the success of the 12th WTO Ministerial Conference in Geneva and reaffirmed their commitment towards improving WTO functions and having a fully functioning dispute settlement system by 2024.

The statement added they agreed to work towards a productive engagement in the run up to the 13th WTO Ministerial Conference to be held in Abu Dhabi in 2024.

Ministers acknowledged that Australia and India are important trading partners. Notably, India-Australia bilateral trade exceeded USD 31 billion last financial year.

“Both agreed that given the trade complementarities between the two countries, there is considerable potential for significantly enhancing bilateral trade within the next 5 years,” the statement added. (ANI)

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Weekly Update: Modi Upsets Sikhs Again; Rahul Wants Constitutional Rights

Prime Minister Narendra Modi simply can’t win with the Diaspora Sikhs, especially those whose lives rotate on Indian Prime Ministers being perpetual enemies. Despite hundreds of social media, WhattsApp groups, websites run by many Sikh individuals and organisations, one news seems to have been missing in all of them. That is the latest news on the MSP, the subsidy for wheat and rice, hot off the press but not in their press.

The threat of withdrawing MSP or Minimum Support Price, was one of the main reasons that the global Sikh community went into an overdrive, literally overdriving trucks, tractors and in more urban places, cars, to express their anger at the notorious Modi Farm Laws. They were declaring their support for the hundreds of thousands of Punjabi farmers who were protesting, braving rain, sun, cold, and sun in Delhi.

Now Modiji has gone and done something that has put many of them in a state of utter disbelief. So dreadful is this situation, that the ‘diaspora Sikh activists’ are lost both for words and actions! They don’t want to believe Modi ji can be so irresponsible! Normally they can dig news from the deepest inner sanctum of Indian establishment. This time they have adopted the approach, see no good, hear no good, speak no good, of the enemy! What has Modi done?

Modiji has supported MSP! SUPPORTED MSP! And what’s more Modiji has taken a warrior like stand at the World Trade Organisation, WTO, in support of protecting the farmers of India, including Punjab. He is not supposed to do that! Modi is meant to be the permanent ‘enemy’ of these protesting Sikh groups. Modi has taken their side. WHAT WILL THEY PROTEST ABOUT NOW?

But it gets more tricky. Facts are challenging sensitivities and loyalties!

At the 12th Ministerial Conference of the WTO, the USA leading G-7 group (which includes the favourite new homeland of Sikhs, Canada) have criticised India for refusing to bring its MSP in line with WTO rules. They accuse India of ‘distorting the market’ by giving MSP of 50% above production costs. This breached WTO rules that restrict it to only 10% above production costs. USA et all went as far as saying that India’s policy is making the grain crises from Ukraine worse.

Now the West has been quite hysterical and emotional about the Ukraine and has sunk ‘logic’ to an abyss of irrationality. It has been shrieking that Moscow wants to occupy all of Europe and even London and Buckingham Palace (King Putin) and must be stopped. Most of the non-western world has been wondering if the West has gone bonkers and wants to stay out of the conflict, much to the insomniac frustration of the G-7 + rest of west.

But to accuse India’s MSP for the world grain crises is taking even irrational statements to a new standard of creationist paranoia.

PM Modi’s Government wants WTO rules to change and permit ‘developing’ countries to give more than 10% MSP above production cost and not be charged at WTO of breaking rules. The US, Canada, Australia and a few others want India to reduce MSP so they can sell their own grain in Indian market and rest of world without competition from India.

The diasporic Sikhs are quiet, perhaps in shock or turning a blind eye to these pesky facts. No word of praise for Modi has been uttered even in whispers. But their biggest dilemma now is, will they drive their trucks, tractors and cars to the White House, or Trudeau’s front door and demand ‘take your grubby hands off our MSP’. It’s a double whammy. First Modi comes to their side, and then their ‘new homelands’ are in fact destroying their relatives in Punjab.

But God is kind, June has come to the rescue. It’s the month when annual rallies by followers of Gandhian Ahimsa, are held to vent anger about the 1984 attack on Sri Darbar Sahib (Golden Temple) by India. Around the world, 360⁰. As Modi is the current Prime Minister of India, he is the target of ‘Modi, Hai Hai, Khalistan Zindabad’. His role in the narrative is to be the bad guy. He has broken that contract! God save the Sikhs, never short of a Schtick.

Citizen Rahul Seeks Equality

Rahul Bhai Gandhi wants to be a citizen and wants his rights under the Constitution! A Constitution that his family in history has treated as ‘house rules’, changed and interpreted as their majesty’s wished. Millions have suffered from the Gandhi family interpretations. Now the Constitution has turned on him. It hurts.

Like courtiers at the Palace, Congress leaders have been protesting at Jantar Mantar for the Prince. They are protesting that the ‘family’ is being victimised and that Enforcement Directorate (ED) has no power to question the Shahebzada of India, Rahul Bhai Gandhi. Even Kapil Sibal has got into the act.

This is the Constitution that Great Grand Daddy made after plagiarising the 1935 British India Act. It is committed to secularism. When minority religions asked for their culture to be given statutory protection, Great Grand Daddy Nehru, said ‘Nahi ho sakta’ we are now secular. But when Hindus asked for cow protection, Nehru seeing votes sliding, quickly enacted ‘cow protection law’, treating cow as a minority. Although they say there are more cows in India than people. When asked, he said it is ‘Indian secularism’, really meaning Nehru secularism dependent on vote banks. Minorities then reverted to non-voting methods to get their version of Indian secularism in law.

Then Grandmother Gandhi decided Indian Constitution only requires one vote to win. So she disenfranchised all Indians of a vote and by her single vote, she brought in the Emergency in 1975. She called it Indian-type democracy. Or Gandhi interpretation of the Constitution. The Sikhs and the international community chased her out after two years, 80,000 in jails, many tortured and the hapless Dr Subramaniam Swamy having to run from the country, seeking refuge in a Harvard teaching post. Modi ji escaped by tying on a turban and pretended to be a Sikh sewadar at Gurdwara Bangla Sahib in Delhi.

Then family interpretation of the Constitution led to attack on Sri Darbar Sahib (Golden Temple) to ‘arrest’ Bhindrawallah and 24 others. Twelve were already dead and others were not present there. There was no charge sheet against Bhindrawallah. No court case. But who cared about such literal interpretation of constitution! It was the Gandhi family interpretation. She decided he was a terrorist and one morning decided she needs to send in the Army to arrest him. Didn’t end well for her.

Then Daddy Gandhi, suspended State and the Constitution’s primary duty of protection of life and liberty through the 59th amendment in 1989. Rajiv Gandhi, treating the Constitution as house rules, decided that as Sovereign family, he can behead people at will (or under his will) and not be bound by silly European ideas of the State’s purpose to protect life and liberty. The trigger-happy Punjab Police was over the moon and went on a shooting spree, termed ‘encounters’ and ‘eliminated’ over 20,000 young men. UN and many Governments reminded Rajiv that life and liberty is the basic purpose of the Constitution.

Then he brought in a number of laws for detention without charges, without trials and you name it. The Constitution was what the Gandhis wanted it to be, albeit with the help of a flock sheep in Parliament shepherded to agree with King Gandhi. Under TADA, 78,000 Gujratis ended in detention without charges in Gujrat where there was no known terrorism. About 75,000 Punjabi Sikhs were detained in Punjab. Only a 160 or so were finally convicted of any ‘terrorist’ threat and that also without much evidence.

Then puppeteer Mummy Gandhi put gold star servant Manmohan Singh to do her bidding. Sikh political prisoners languished in prisons although no constitutional provision permits life sentence for political prisoners. However, the Constitution is what the Gandhis wanted it. Police excesses continued. Bribes apparently broke world records.

The list is endless. Detention without charges or even proper procedures. In Bhuller case, there was no evidence and no witnesses

Now Rahul Bhai wants Constitutional rights! Dr Swamy, the nemesis of Gandhis, has never forgotten his exile from the one woman democratic decision of ‘Emergency’. He wants to exile the Gandhi family to an Island that might sink under climate change.

He brought a charge in court of money laundering against prince and mummy Gandhi who are major shareholders in a company called Young India, even though they are geriatrics. Apparently Congress handed them ₹2,000 crore of property which should really be owned by the country as the original company, Associated Journals, was started by 5,000 freedom fighters and Great Grand Daddy to run a newspaper National herald. It has passed on to the ‘Family’.

The Enforcement Directorate is simply doing its jobs as would be required by court, since charges are at court. Unlike during the Gandhi years, Rahul is free to go home and come back and not in some dingy detention centre being kicked around by a drunken Punjab cop saying ‘oyee’.

The comical group of once very terrifying and powerful entity known as the Congress high command have been reduced by Modi to gather at Jantar Manter shouting and asking for rights that they used to trample on when in power. How things come around! He is only receiving what the family established. Still, if jailed, authorities might oblige and station female jailers wearing shorts, one of Rahul’s visions for modern India.

Farm Laws: Winners, Losers And The Future

The long term collateral impact of the biggest sustained protest in contemporary history is yet too early to be assessed. Prime Minister Modi, whose public persona was crafted as a tough leader who never does a U-turn, has been forced to do just that by the relentless farmers of Punjab, Haryana and Uttar Pradesh. They had more to lose from these laws than Modi did with a U-turn. He has repealed the laws to every one’s relief, except the arm-chair warriors around him who wanted him to stand firm against his own citizens.

What was also remarkable was the unity of the farmers’ leadership. Sikh leadership rarely remains united beyond a few months. The Punjab-Haryana leadership in association with the inspiring and formidable Rakesh Tikait of UP also managed to de-communalise the struggle despite several attempts by the Government to make it appear a Sikh separatist campaign. Astute and intelligent leadership has emerged from this movement. The one to watch.

It will remain to be seen what happens next in the talks. Will the leadership remain focussed and united? Will it successfully continue to be a one purpose campaign, keeping away opportunist politicians eying the potential vote bank?

While the immediate win is obvious, it’s the collateral impact of the protest that could be even more powerful. Struggles in the Punjab have often shaped the course of events in South Asia, sometimes the world. The cracks in the Mughal Empire were first split open in Punjab in 1710. Within 20 years the Mughal Empire began to unravel. It was the fall of the Punjab in 1847 that led to consolidation and expansion of the British Empire. It was the five year sustained protest movement in Punjab in 1920s for regaining control of Gurdwaras that started the collapse of the British Empire. The British invited the Congress in 1932 to talk about possible transfer of power. Why Congress and Gandhi dillydallied for another 15 years has not been looked at by historians. Once India became free, the rest of the British Empire fell apart like dominoes.

It was the communal violence in Punjab in 1947 that continues to dominate geo political issues in South Asia. And it was the Punjab Sikh agitation against Indira Gandhi’s Emergency in 1975 that weakened her and the Congress. It started the rise of the alternatives. It was the Sikh uprising after 1984 invasion of Golden Temple that led to final disintegration of Congress, rise of BJP and Hindutva.

The Punjab rarely gains much politically from its struggles but creates waves that quantumly precipitate other upheavals in South Asia and the world.

What will this movement precipitate? It is possible that a coherent federal Indian movement might arise as a collateral from the weakening of BJP. It is possible that the ‘small farms’ issue could become internationalised and small farmers around the world might rise against the encroaching corporate agri business. It could be the beginning of dismantling of stranglehold that global corporate sector has on power. Struggles from Punjab influence events in many ways and the consequences of this struggle remain uncharted yet.

Equal winners in the struggle were the women of India. The women of Punjab, Haryana and UP have shown a strength, resilience and daring that is an inspiration to the world. They stood shoulder to shoulder with the men and many times endured far more. They refused to go back to the villages and instead brought their children and grandchildren with them. They dared the Government and refused to bow.

It is difficult yet to predict the personal and political impact on the Indian Prime Minister Narendra Modi. People who have met him personally often say that he is a pleasant, charming and a warm person who empathises with the concerns of others. But the BJP electoral machine had built him as an Indian Thatcher, decisive and never taking a U-turn.

Margaret Thatcher, the British Prime Minister who destroyed the coal mines and the Unions, is famously remembered for her rhetoric, ‘You turn, the Lady is not for turning’. Yet in her reign, she did many U-turns, most infamously in the very unpopular poll tax. Similarly Modi has done a few U-turns, with the repeal of Farm Laws as the most spectacular one in full public gaze.

Nevertheless, it is not appropriate to say he lost. He bowed to democracy. He is a leader of a democracy. When he sensed that that the protestors were gaining increasing support from Indians from all corners of the country, he did the decent thing. He ignored his image makers and took a personal decision. He decided to repeal the laws. He may initially have stood his ground against the farmers, but ultimately he defied those who ‘made’ his public persona.

ALSO READ: Farmers Protest – Solution Lies With Canada Sikh MPs

The greatest losers in this have been Canada and Australia and their big Agri businesses assisted by WTO rules set by western powers. It was Canada and latterly Australia that have relentlessly been gunning at the MSP (minimum support price) for farm produce in India. Australia brought a formal complaint against India in 2019 with Canada joining the ‘arbitration board’ to decide whether India has broken World Trade Organisation rules by given 150% MSP (or MPS in WTO language) for wheat and 185% for Sugar Cane.

The Indian Government was under immense pressure to scale down MSP to a mere 110% or bring in the private sector. Both Canada and Australia were drooling when farm laws were introduced and Modi stood firm. They are of the opinion that due to miniscule profit margin under WTO rules and free market, small farmers  will stop growing wheat and other food grains thus pushing India to buy these products from Canada and Australia instead. They had the GDP obsessed IMF on board too. India is a huge potential market for the mega farms of both countries. It was no surprise that Sikh MPs in Canada maintained a studious silence on the Punjab Farm Laws.

If Modi decides to stand by Indian farmers and accepts their demand for MSP to be legislated at 150% or more, this will be a great blow for the 30-year campaign by Canada and recently by Australia to break into the Indian grain market.

With growing dissent within the WTO for its pro-western and pro-corporate orientation, this protest may spur India to lead the developing countries and force change in WTO.

Perhaps the greatest winner of the protest and the Modi U-turn is India’s otherwise dysfunctional democracy. Often appearing to be faltering and surviving in Intensive Care, India’s democracy has in fact shown itself to be adaptable and a great survivor.  Despite many hiccups, election violence, wannabe dictators, it has shown its resilience time and time again. It broke Indira’s Emergency and it has forced BJP to repeal the laws.

Whatever happens next, whether the BJP starts to lose grip of near total power or federalism emerges as the way forward, democracy will survive in India for long time to come. It will make and break leaders. It is the wider collateral impact on the world that is to be watched from this protests.