Trade

Bolsanaro, 2020 R-Day Chief Guest, Is Making Life Harder for India's Sugarcane Farmers

Brazil has complained to the WTO about the domestic support measures as well as export subsidies being provided by India for sugarcane and sugar. Unfair global trade rules makes this dangerous for India's farmers.

Jair Bolsonaro is India’s Republic Day chief guest for 2020. He has been described variedly as a bigot, homophobic, authoritarian, xenophobic, militaristic, racist, ‘exterminator of the future’, misogynist and so on. Many citizen groups are questioning the decision by the Union government to invite him as our chief guest.

The controversy around Bolsonaro does not end there. What has not been discussed enough is that he and Brazil have turned out to be a direct threat to more than five crore farming families in India who grow sugarcane. This is not about the Brazilian president’s policies for his own country, but what he is jeopardising here in India. Brazil had dragged India to the World Trade Organisation’s (WTO’s) dispute settlement body, contending that India’s commitments to some binding rules in the WTO have been violated.

Unjust rules created when the WTO was established provide space for such complaints to be lodged. If the dispute panel upholds the complaint of Brazil (and other countries which have joined subsequently), Indian sugarcane producers’ future looks bleak.

Indian farmers are feeling indignant that by inviting Bolsonaro as the chief guest, the Indian government appears to be giving a message to them that their lives and livelihoods do not matter much for the government. The Indian Coordination Committee of Farmers’ Movements (ICCFM) has given a call to farmers to protest the injustice in the WTO, the threat to our farmers’ livelihoods and the invitation by the Indian government to Bolsonaro.

The sugarcane dispute

India is the world’s second largest sugarcane producer, but is also the world’s largest sugar consumer. Around five crore farm families, mostly small and marginal, are involved in sugarcane production in the country. Sugarcane farmers are also mired in a deep crisis, with unpaid dues from sugar mills to the farmers touching around Rs 20,000 crore at their peak. Latest data shows the dues at about Rs 4,500 crore at the moment.

Brazil, on the other hand, is the world’s largest sugarcane and sugar producer as well as the largest exporter. Brazil accounts for about 45% of the global sugar exports usually (it was 29% in 2018). Brazil, Australia and Guatemala export 70-75% of their sugar production and together have a 53-55% share in the global sugar market. India, on the other hand hovers between 1-4% of the export market.

In February 2019, Brazil raised questions on the domestic support measures as well as export subsidies being provided by India for sugarcane and sugar, and contended that these measures were inconsistent with WTO rules and articles. A formal complaint was later lodged with the Dispute Settlement Body of the WTO by Brazil, joined later by Guatemala, Costa Rice, Australia, the European Union, Thailand and others.

Also read | The Farm Widow: A Suicide and a Life Left Behind

Brazil’s contention is that India increased its Fair and Remunerative Price (FRP) for sugarcane from Rs 1,391.20 per tonne in 2010-11 to Rs 2,750 per tonne in 2018-19. State Advised Price (SAP), which is an additional support, was also questioned. Brazil pointed out that the Minimum Indicative Export Quota (MIEQ) fixed for sugar mills was increased from two million tonnes in 2017-18 to five million tonnes in 2018-19, leading to pressure on global sugar prices.

Brazil et al are basically arguing that the domestic support is in excess of India’s de minimis entitlement of 10% of value of production as per the Agreement on Agriculture, that the support being extended by the government is inconsistent with provisions of the Agreement on Subsidies and Countervailing Measures too, that these are prohibited subsidies and that India is failing to notify the subsidies being provided.

The reality is different, however.

Firstly, the Indian government neither procures nor pays FRP directly. There are only 43 public sector sugar mills out of the 732 mills in India. It is only an indicative floor price announced to protect farmers from exploitation by sugar mills, which mills are supposed to pay the supplier-farmers.

Secondly, while calculating Market Price Support (MPS) in the WTO regime, the external reference price (ERP) used to this day is that of 1986-88, without building in for inflation. The ERP was fixed at Rs 156.16 per tonne, which is being compared with current FRPs. If inflation is built in, the deflated SMP/FRP is actually only around Rs 290.88/tonne, and not Rs 2,750/tonne which is being used to challenge India.

Thirdly, during the base period of 1986-88, India was providing ‘Amber Box’ support (that support which in WTO terminology is considered to be trade-distorting) that was below the de minimis level and was therefore not entitled for Aggregate Measure of Support (AMS), which is capped at zero. This essentially means that India has been bound by an unfair rule of an unequal playing field created at the time of establishment of WTO.

Fourthly, in MPS calculations, countries like Australia have used total production of sugarcane in India as “eligible production” and claimed that our domestic support was 99.8% of value of production. Once again, the fact that the government does not pay the farmers any FRP has been ignored. In this entire discussion, it is worth noting that sugarcane itself is a non-tradable commodity in the international market.

Meanwhile, contrary to allegations of excessive support, Indian sugarcane farmers are reeling under a crisis and many farmers who have committed suicides were into sugarcane cultivation. If Brazil et al win their case in the WTO, India would have to dismantle its FRP announcement policy for its farmers, which will affect sugarcane production and lead to imports from elsewhere. It is clear that Brazil, Australia, Guatemala etc., are trying to capture our market for themselves.

Injustice of WTO

The injustice of the rigged rules of WTO will become apparent if seen in the context of what other countries are able to do, seemingly in compliance with rules laid therein. For example, a developed country like the US provides product-specific support to a tune of 64.4% of the value of production (2016 figures) which is not to be questioned, given its AMS entitlements at the time of WTO establishment.

It is not just with regard to sugarcane that the WTO regime has been unfair to the needs of farmers in India and elsewhere.

Also read | A Reminder of the Bitter History of Modern Sugar

Rich countries continue to have huge subsidies provided to their farmers by classifying these under Green or Blue Boxes. Any talk of reduction of domestic support in the developed world has been scuttled time and time again. The input subsidies that Indian farmers receive are nominal and even this is under threat now from WTO discussions. The peace clause obtained on the food stockpiling issue by India is not effective and we have not been able to get a permanent solution on this matter.

The fate of the vast majority of our producers’ lives and livelihoods, given the ongoing disputes and precarious situation related to paddy, wheat, sugarcane and pulses, are now to be decided in the WTO regime. This is simply not fair, given the affirmative space clearly needed for our farmers’ livelihood security, and for our nation’s food security and sovereignty.

While the Indian government is putting up its defence in these contended areas as best as it can, it is time to overhaul the entire multilateral trade regime that got built on rigged rules to favour certain countries and businesses. It is simply not fair that not only do our farmers have to contend with subsidised dumped produce from elsewhere, but also face threats of withdrawal of existing meagre support from our government.

Given the unprecedented stance taken by the Indian government when it withdrew from the Regional Comprehensive Economic Partnership negotiations recently, it is not too much to expect that India will take a lead in addressing unfair trade through the WTO regime too. It is also time that the Indian government clarified to our farmers what its message was to them when it made Bolsonaro the chief guest of 2020 Republic Day Celebrations.

Kavitha Kuruganti is associated with the Alliance for Sustainable & Holistic Agriculture (ASHA-Kisan Swaraj network) and can be contacted at kavitakuruganti@gmail.com.