Prices of key farm produce like wheat and rice in India are way below international prices, which means rural households will not be robbed of their income if liberal imports of these commodities are allowed.
Data collected by Business Standard show that rice prices in India are less than half of global prices, whereas wheat sells at two-thirds of global prices. While soya oil prices are the same in the two markets, cotton prices are slightly higher in India. These commodities can be exported free of duty to India.
| COMMODITIES WITH ZERO DUTY | ||
| Commodity | Landed price | Domestic price |
| Wheat |
16,000 | |
11,000
32,000
14,000
27,500
27,000
6,000
6,000
27,200
29,500
Cotton price in Rs/candy
Talks among trade ministers of World Trade Organization member countries broke down in Geneva earlier this week after developing countries, including India, refused to compromise on protection measures for farm products on the grounds that it would endanger their marginal farmers.
After the talks collapsed, some commentators had remarked that there was less economic and more political rationale in rejecting the offer from developed countries. In return, they argued that developed economies like the United States would have opened up their services sector to developing countries. India could have been a big beneficiary.
Doha Round talks revolve around cutting bound import duties of nations, which are the maximum rate of duties that a country can impose. Most nations levy an import duty, which is lower than the bound duty, and is called applied rate. According to commerce ministry estimates, India’s average bound farm duties are 114 per cent, while the applied duties are nearly 37 per cent.
Recently, India had slashed import duties on edible farm products like pulses, wheat, rice and palm oil in a bid to fight inflation, which is currently a 13-year high. But factors such as low domestic prices as well as the global shortage of commodities ensured imports were never more than a trickle.
Government officials pointed out that the country needs policy flexibilities to ensure that the marginal farmer is not impacted, in case of an import surge or fall in the import price. One such proposal in the WTO is called the Special Safeguard Mechanism, which is a set of norms to temporarily invoke increase in import duties to counter import surges or fall in import prices.
“But it does not mean that protection measures will be invoked just because there is import surge,” said a commerce ministry official, adding: “For example, palm oil imports have been increasing year on year, but India has only decreased import duties. There is a huge demand for edible oil in the country which needs to be met through imports.”
Another set of protection measures are Special Products, which are farm products which will see lesser duty cuts. India has nearly 700 farm tariff lines, of which nearly 108 can be designated as SPs. Out of these, India can maintain existing bound rate in nearly 35. WTO experts maintain that sector with large number of farmers or workers should be designated as SPs.
Some trade experts pointed out that in the past, reduced duty cuts have impacted earnings of Indian farmers.
“In 2000, cotton prices fell by nearly 20 per cent after Indian mills started importing cotton from the US,” said Linu Mathew Philip, a research officer at the Centre for Trade and Development.
He pointed out that India needs to designate products in beverages, dairy, grain and raw hide categories as SPs.
“The difference between the bound rate and applied rate is very low in these products. Hence they need to be shielded,” Philip added.
