India’s Sugar Woes at the World Trade Organization | International News

These instances highlight the challenges confronting many developing country members, such as China, India, Egypt, Jordan, Kenya, Pakistan, Turkey, Zimbabwe, etc, in implementing domestic support policies under the restrictive provisions of the AoA (Sharma 2016). The problems for most developing country members are not only limited to farm distress but also include inefficient markets, volatility in agricultural prices, food insecurity, etc. In light of these challenges, governments in developing countries are compelled to implement various schemes, including price interventions, consonant with their agri­cultural and socio-economic conditions. Such interventions are not only important for agricultural development but also in achieving the United Nations’ Sustainable Development Goals.

On the one hand, these support policies are increasingly being questioned at various meetings of the Committee on Agriculture (CoA). On the other, developing country members feel short-changed, as many developed country members are able to provide consistently high levels of support to agricultural products without breaching their commitments. For instance, product-specific support to the sugar sector for India is capped at 10% of its VoP, whereas developed members with bound Aggregate Measurement of Support (AMS) are not restricted by any such product-specific limit. It was these entitlements that allowed developed members, like the European Union (EU), to maintain high levels of support to its agriculture (Sharma 2018). Issues related to these restrictive, unfair, and skewed provisions have been raised time and again on multiple occasions by developing members in various ministerial meetings of the Doha Development Round (WTO 2012). Despite these demands, limited progress has been achieved due to the divergent positions of WTO members. It is a herculean task for developing members to address the plight of farmers within the limited policy room in the AoA. Considering the domestic situation in developing countries, policies covered under product-specific support, such as market price support (MPS) or budgetary support, are necessary and required to protect the interest of millions of low-income and resource-poor farmers.

The flexibility to provide product-specific amber box support for developing members is capped at 10%. In this regard, the method used to calculate the MPS under amber box is also important, wherein the applied administered price (AAP) is compared with a fixed external reference price (ERP) based on 1986–88 prices. The relevance of comparing these two values has been questioned by many developing members through various proposals in negotiations (WTO 2012). Based on this method and equivocal notions on eligible production, Australia, through a counter-notification, claimed that the alleged MPS for India’s sugar sector on account of fair and remunerative price (FRP) was in breach of its commitments (WTO 2018a).

Under the AoA, trade-distorting, product-specific support can only be provided under the amber and blue boxes. With the limited policy space available under the amber box and the impasse in the Doha round, the only viable option to extend product-specific support to the sugar sector is the blue box. Under this box, all WTO members can provide support without any prescribed limits, provided the associated conditions are also complied with. In light of the farm distress in India, it would be interesting to examine whether a blue box programme can be initiated to provide the much-needed breathing space to the sugar sector.

Most of the research undertaken till date has majorly focused on the programmes covered by the provisions of the amber and green boxes. Studies undertaking the examination of the blue box are rare and lesser so from the perspective of developing countries. This study derives its uniqueness by examining the feasibility of a blue box programme for Indian sugar sector.

The paper is divided into seven sections. After this introductory section, the second and third sections analyse the legal provisions of domestic support under the AoA and explain the challenges and problems faced by the sugar(cane) sector at the WTO, respectively. The fourth section critically analyses the provisions of the blue box and the conditions mentioned therein. The fifth section strives to provide a framework for operationalising a blue box programme for the distressed sugar cane sector. The sixth section highlights the need for undertaking crop diversification in sugar cane areas, while the last section presents conclusions.

Domestic Support Provisions

The present paper is based on an economic–legal analysis to examine the compatibility of the provisions of the blue box with the prevailing agricultural situation in a developing member, such as India. Further, the study highlights the constraining provisions of the amber box for developing members and the need to explore the provisions of the blue box for the Indian sugar sector.

Based on the potential impact of a measure on the production, prices, and international trade, the AoA classifies agricultural domestic support measures as amber, blue, green, and deve­lopment boxes. The WTO member countries can provide domestic support under the green and blue boxes without any financial limit. Further, all developing WTO members, except China, are entitled to provide unlimited investment support and input subsidies to low-income or resource-poor farmers under the development box (Article 6.2). Measures under green box are deemed to have no or minimal trade-distorting effect on the production and includes programmes related to general services, food security, and direct payment under Annexure 2 of the AoA.

Unlike other boxes, member countries have limited flexibility to provide domestic support under the amber box, which comprises product- and non-product-specific support. Support under this box is limited to a member’s Final Bound Total AMS (FBTAMS) based on its schedule of commitments. To comply with the AoA, the current AMS of a member country cannot exceed the FBTAMS. In the case, product- or non-product-specific support is more than the de minimis limit—the minimum trade distorting support allowed under the amber box—it will be counted under the current AMS. The applicable product-specific de minimis limit for developed and developing country members is fixed at 5% and 10% of the VoP, respectively.

The AMS entitlement of a given member is determined based on the level of trade-distorting support it provided under the amber box during the base period of 1986–88. In essence, the members that were giving huge support during the base period were rewarded with AMS entitlements. For example, the US had provided trade-distorting support above the de minimis limit in 1986–88, and therefore, it is currently entitled to provide amber box support up to $19 billion beyond the applicable de minimis limit (Figure 1). At present, 28 member countries have AMS entitlements, due to the high level of trade-distorting support provided by them under the amber box to their agricultural sector during the base period. In contrast, members with trade-distorting support below the de minimis level during the base period had their AMS limit capped at zero. Majority of the developing country members, including India, fall under this category and therefore cannot provide domestic support exceeding 10% of the VoP.

Under the amber box, product-specific support can be provided in the form of MPS or budgetary support based on price gap or other factors. Many developing members provide support to their farmers in the form of price support to ensure remunerative prices and to protect them from price volatility. Product-specific support, based on MPS, is calculated by multiplying the gap between the current AAP and the ERP with the eligible production. The fixed ERP is based on export or import price of that product in the base period. Without taking inflation into account, the gap between AAP and ERP tends to increase over the years, which results in a shrinking policy space.

The other box of domestic support, which is most relevant for the purpose of this study, is the blue box, through which support to farmers is given in the form of direct payments under a “production-limiting” programme. Like the amber box, these payments can be made on a product-specific basis, provided the specific conditions attached to Article 6.5 of the AoA are complied. Blue box payments made to agricultural producers should be based on (i) fixed areas or yields; (ii) 85% or less of the base level of production; or (iii) fixed number of livestock head. Given the production-limiting nature of these payments, a majority of the WTO members refrained from utilising this box to support their agriculture.

Indian Agriculture at WTO

In recent times, India’s agricultural policy, especially price support to products like wheat, rice, pulses, sugar cane, and cotton, has been questioned at the WTO. The MSP is a form of price intervention by the government to protect farmers from price fluctuations, and is intended to provide minimum remunerative prices to them in order to prevent distress sales. It is announced by the government in consultation with the Commission for Agricultural Costs and Prices (CACP) prior to the start of the sowing season (CACP 2017). For sugar cane, the government announces the FRP as the minimum price of sugar cane payable by sugar mills to the farmers. To ensure the provision of higher remunerative prices for sugar cane as compared to the FRP, some provincial governments announce a state advised price (SAP) for sugar cane (CACP 2017).

Challenging India’s price policy, WTO members, such as the US, Canada, and Australia, issued in total four counter-notifications against India, alleging that it provided trade-distorting amber box support beyond the applicable permissible limit of 10% of VoP (WTO 2018b, 2018c, 2018d, 2019d). For instance, Australia alleged that the MPS to the Indian sugar sector was 94.4% of VoP during 2016–17 (Figure 2). In contrast, domestic support notifications submitted by India from 1995–96 to 2017–18 show that product-specific support is well below the de minimis limit across all the products.

The divergence between product-specific support given in India’s notifications and counter-notifications is mainly due to two factors: (i) currency used in domestic support calculations; and (ii) the quantity of production eligible for domestic support.

In the counter-notifications, the complainant members calculated India’s domestic support in Indian rupees (`) and compared the current AAP (which was taken to be the FRP for sugar cane and minimum support price for other products), with the fixed ERP based on 1986–88 prices. Without considering excessive inflation, the gap between the fixed ERP increases significantly over the period as shown in Figure 3. For example, the fixed ERP of sugar cane (notified by India in its schedule of commitments) was `156 per tonne, whereas the AAP was `2,300 per tonne for 2016–17 (WTO 1995b). It is to be noted that Article 18.4 of the AoA discusses the impact of excess inflation on members’ domestic support commitments. However, there is ambiguity whether the consideration of inflation is a unilateral right or depends on the discretion of other members during the review process. Furthermore, what constitutes excess rate of inflation has not been defined in the AoA.

India has been consistently notifying support in US dollars. It is to be noted that India used Indian rupees in its schedule of commitments for domestic support purposes (WTO 1995b). At various meetings of the CoA, India has pointed out that there is no provision in the AoA that prescribes the rules for currency to be used for calculating MPS (WTO 2019e). Further, India’s use of rupees in its schedule of commitments was based on self-declaration, rather than compulsion, under provisions of the AoA. Many other members, such as Turkey, Brazil, Bangladesh, Uruguay, etc, also notify their domestic support in US dollars (WTO 2011, 2018g, 2018h, 2019b).

Another reason for divergence in MPS figures in the notifications and counter-notifications is due to the definition of eligible production. In the various meetings of CoA, India has repeatedly stated that product-specific support to the sugar sector is zero as no government procurement is undertaken (WTO 2018i). However, Australia, in its counter-notification, has considered the total production as eligible production, relying on the findings in Korea-Beef (WTO 2018a). Contesting this, India has repeatedly stated that the findings in this case is specific to the circumstance when there is a declaration by the members of the estimated quantity of purchase (WTO 2019c). Additionally, some members have maintained that the Appellate Body and Panel reports do not carry precedence weight and therefore, the findings of any such reports are not binding on other members (US 2018). Despite the above, Australia, Brazil, and Guatemala formally initiated a dispute at the WTO on various measures, including FRP and SAP related to the Indian sugar sector.

This frontal challenge to India’s agricultural policies highlight the issues developing countries are facing at the WTO. Irrespective of the outcome of the dispute and given the minuscule policy space under the amber box, it is critical to look for alternatives to provide product-specific support to the sugar sector within the existing framework of the AoA.

Blue Box Provisions

As mentioned above, trade-distorting, product-specific support other than the amber box can only be provided under Article 6.5 of the AoA. Unlike in the amber box, member countries have the flexibility to provide support within the framework of the blue box sans any financial limit. However, the support under this box should be based on “production-limiting” programmes.

Since the establishment of the WTO, it is mainly the developed country members that have utilised the provisions of the blue box to support their agricultural sectors. The EU has consistently been a key user of this provision and implemented numerous programmes, such as voluntary coupled support, for many products under its Common Agricultural Policy in 2013.¹ Similarly, Japan had implemented various programmes, such as the Rice Farming Income Stabilisation Programme (RFISP) and the Direct Payment to Rice (DPR), to support rice farmers and shield them from price fluctuations (WTO 2001, 2014). Another major user of Article 6.5, Norway has administered programmes, such as the Quality Incentive Support Programme for Beef and Support to Small and Medium Size Dairy Farms, for products, such as milk, meat, dairy, etc (WTO 2015a, 2019a). The US had utilised the provisions of this box only once in 1995 by notifying deficiency payments for products, such as wheat, rice, corn, etc, under it (WTO 1995a).

Among the developing country members, China was the first to introduce direct payments under the blue box to support corn and cotton farmers in 2016 and 2018 respectively (WTO 2018e, 2018f). Given the fact that its product-specific support is capped at 8.5% of the VoP, China faced a severe lack of policy space to support its agricultural sector, especially cotton, corn, rice, and wheat. A dispute on its domestic support to farmers brought against by the US, possibly forced China to explore the blue box to provide product-specific support to corn and cotton.

Besides the explicit conditions laid down in Article 6.5, certain issues remain implicit that are important for the implementation of a programme under the blue box (Sharma et al 2020). First, the issue arises as to whether a member can provide product-specific support simultaneously under both amber and blue box. The provisions of the AoA do not bar a member to provide simultaneous support under different boxes for any particular product. Since no such restrictions are imposed, member countries have the flexibility to use one or both the boxes concurrently for a covered product. For instance, Norway had given product-specific support to milk under the ­amber and blue boxes in 2017.

The second consideration is examining what entails the production-limiting condition under Article 6.5. The conditions attached with the provisions of blue box itself ensure that payments are limited on a fixed area and yield, or base-level output, or fixed number of livestock head. In case a member implements a product-specific programme based on one of these specific conditions, it automatically complies with the production-limiting condition as well. The EU has maintained this stand stating that support measures based on conditions laid down in Article 6.5(a) are “production-limiting by implication” (WTO 2009). Further, production under a blue box programme can increase despite payment based on fixed area and yield or output or fixed head. For instance, if payments are made on fixed area and yield basis, production can still increase due to an increase in productivity, which can nullify the production-limiting condition.

The third issue is fixing and updating the base period for programmes initiated under the blue box. In this regard, Article 6.5 is silent and therefore, member countries can exercise discretion in fixing the base year. On updation of the base period, nothing in the Article 6.5 prevents a member to change the base area or output or number of livestock head. However, given the production-limiting conditions mentioned in the article, updation of the base period for the same programme would be inconsistent with the intention of the article. Nonetheless, many members have updated the base period for covered commodities. For instance, Japan implemented the RFISP during 1998–2009 with base period 1995–97 (WTO 2001) and replaced it with another blue box programme, DPR, in 2010. The variable component of DPR, which aims to protect the covered farmers of rice from price fluctuations, was based on 2006–08 (WTO 2014).

The fourth consideration in implementing a blue box programme is the quantity eligible to receive payments under it. Article 6.5 prescribes that the payment for a covered product will be made based on the conditions mentioned under it. However, a situation may emerge in which the actual area, yield or production, or livestock exceeds the prescribed limit. What happens in such a situation is not envisaged by the AoA. Interestingly, in the case of the EU, it is found that even the excess quantity is entitled for payments; however, the per unit payment reduces proportionately to the increase in quantity (EU 2013).

The fifth point in this regard is the level of implementation of the blue box programme. The article gives implied discretion to the members to fix the level of implementation at the national or regional or farm level. The Chinese blue box programme operates on a regional level, covering four corn-producing regions (WTO 2018e). The Japanese rice programme had farm production quotas that applied to each individual farmer (WTO 2015b).

The sixth consideration in a blue box programme is the type of direct payment that can be provided for these programmes. In other words, AoA does not impose any restriction on the type of programme, provided the payment under it is direct. Members have adopted different modes of providing payments to eligible producers. Japan and China have implemented price deficiency-style payments, whereas EU provided payments based on fixed area and yield (WTO 2001, 2014, 2018e).

These above issues are important to be addressed before the implementation of a blue box programme. Given the farmer distress, the constraining provisions under the amber box and an impending dispute at the WTO, India’s sugar(cane) sector can benefit from a blue box programme. As is evident by the practice of many WTO members, blue box programmes accord various operational flexibilities, which India can tailor to suit its socio-economic conditions provided it fulfils the criteria for these programmes.

Operationalising Blue Box

One of the main objectives of Indian agricultural policy is to shield farmers from price fluctuations by ensuring remunerative prices for agricultural products. For the welfare of sugar cane farmers, the government annually announces FRP to achieve this very objective. However, India is facing one of its worst periods of agrarian distress and sugar cane farmers are among its major victims (Lavanya and Manjunath 2018) due to unpaid cane arrears that reached `19,129 crore in 2018–19 (Figure 4). These cane arrears arise due to the inability of sugar mills to pay outstanding dues to farmers on time, owing to a liquidity crunch. To alleviate this situation and ensure effective implementation of the FRP, the government announces measures, such as interest subvention, production subsidy, buffer stock subsidy, etc (PIB 2015; DFPD 2015, 2018). However, compounding the distress in the already stressed sugar sector, the FRP policy, among other measures, has been challenged at WTO.

As mentioned above, a blue box programme can be a fitting panacea to the ills plaguing India’s domestic support policy of the sugar(cane) sector. Unlike the amber box, under the blue box, India can provide support to the sugar sector without any financial limit, provided the new programme complies with the conditions attached in Article 6.5. However, a question arises whether the government can implement a price support or deficiency type policy under this box. The AoA does not impose any restriction on type of programme, whether price deficiency, price support, or area payment, etc, from being covered under blue box. Further, the production-limiting condition would be automatically satisfied if India initiates a policy/programme for the sugar sector, based on the fixed area and yield or up to 85% of the base level of production. For the purposes of fixing area and yield or determining the base level of production, members have used the past planting area and yield or production levels.

Payments based on fixed area and yield: Article 6.5 is silent in terms of choosing a year to fix area and yield. However, it is logical to fix both the variables based on past data, but it is not necessary that both the variables relate to the same year. To ensure maximum coverage, India can fix these parameters on the basis of plantation area of 2014–15 and productivity of 2017–18, which were 5.07 million hectare and 79.70 tonne per hectare, respectively. In these years, area and productivity were highest (Figure 5). In this scenario, payment would be given on per hectare basis for a fixed area, that is, 5.07 million hectares. In future, a scenario may emerge in which area and/or yield increase. In that case, the additional increase in area and yield would not be entitled for payment under this programme.

Another important point in this regard is that since the payment would be on per hectare basis, it will have to be provided on the basis of land records to determine beneficiaries. Unless there is a written lease agreement, tenant farmers would not be covered.

Payments based on fixed level of production: Major hurdles in implementing the blue box programme based on fixed area and yield are (i) significant changes required in the existing FRP policy, (ii) inability to shield farmers directly from price volatility, (iii) exclusion of tenant cultivators due to lack of written lease agreements, and (iv) non-feasibility of price support payments. Given these problems, the government can explore a blue box programme based on up to 85% of the base-level production, for price support or deficiency payments.

For this, 2018–19 can be taken as the base period due to the highest recorded sugar cane production, that is, 400.37 million tonnes (Figure 6, p 49). Under Article 6.5, the production eligible for receiving blue box payments thereon would be 85% of 400.37 million tonnes, that is, 340.31 million tonnes. Any excess production would be ineligible for benefit under the blue box. India can implement a price deficiency or price support or any other variant of policy, as there is no restriction under Article 6.5 regarding the type of programme/policy. However, irrespective of the type of programme under blue box, the government has to ensure that payment should be direct to the farmers. Further, this programme can be initiated at the provincial or national level. Both options are explored in the next two subsections.

Implementation at provincial level: At the provincial level, a blue box programme can be implemented in all the states where the cumulative sugar cane production is less than 85% of India’s total production. Due to non-availability of state-wise data for 2018–19, for the purposes of this section, data for 2014–15 is used for in this year the recorded production was the second highest. Table 1 shows that except Karnataka and Bihar, all other states and union territories of India can be covered by blue box support, as their cumulative share in all-India sugar cane production is 84.05% in 2014–15. Inclusion or exclusion of any state is a matter of policy, and the government can decide on the eligible states for this programme, provided the total production of covered states does not exceed 85% of the base level of production. In case production in the covered states exceeds the set production limit determined under this programme, excess production would not be entitled for payments. For the states not covered by the blue box programme, the government can start a new programme under the amber box to protect the interest of farmers therein. However, exclusion or inclusion of states would be politically sensitive, given the farmer distress and cane arrears. Thus, implementing a blue box programme based on the base level of production at the national level may be more viable.

Implementation at national level: Under this option, the production-limiting criteria would be set at the national level in a base period. If 2018–19 is taken as the base the period, then the blue box limit would be 340.31 million tonnes, which is 85% of the total production, that is, 400.37 million tonnes. In future, excess of any production over 340.31 million tonnes would not be entitled for payment. However, it is important to analyse the feasibility of implementing this policy.

Accordingly, this paper examines the trend in cane crushed by sugar mills in India. In the existing practice, sugar mills pay the FRP only on cane crushed by them. The highest quantum of cane crushed was registered at 78.48% in 2006–07 (Figure 6). It is noted that, on an average, only 66.83% of the total sugar cane production was crushed by sugar mills from 2000–01 to 2018–19 (Figure 6). Using this percentage, the coverage by the FRP was 267.56 million tonnes in 2018–19, whereas the limit under the blue box is 340.31 million tonnes as previously mentioned. In other words, it would provide flexibility and policy buffer, even in case production increases in the future. Sugar cane used for other purposes, such as production of gur (jaggery), khandsar (condensed sugar syrup), etc, will not be covered under this proposed blue box programme. Introducing such a programme will provide adequate policy space to support sugar cane farmers.

Further, Article 6.5 is silent on whether the base period for a particular programme can be updated or not. In fact, members implementing the blue box programme over the years have updated the base period by terminating old programmes and initiating new ones, as can be seen in the case of Japan (WTO 2001, 2014). Currently, the Indian government does not allocate money directly for FRP, but indirectly by implementing various sub-schemes, such as interest subvention, buffer stock, and production subsidy. In future, by tweaking sub-schemes for the effective implementation of FRP, the budgetary expenditure can be notified under the blue box.

Crop Diversification

As discussed above, blue box programmes are production-limiting rather than “production reducing.” In that case, the payment is made on the basis of fixed output or fixed area and yield, then the programme automatically becomes production-limiting. However, many countries have nonetheless undertaken acreage reduction programmes, such as China, which requires a 10% reduction in corn acreage under its blue box policy, primarily in the cold and arid regions of the country (Wei 2017).

Implementing such acreage reduction might be beneficial for India, in terms of addressing the problems related to sugar cane cultivation. The sector is beleaguered with cane arrears arising from the non-payment of FRP, to the tune of `19,129 crores in 2018–19. Sugar mills are also facing mounting losses due to low international sugar prices and a glut in domestic supply, which results in the inability of sugar mills to make timely payments to farmers.

Despite these problems, sugar cane remains one of the most popular crops due to its profitability, as its per hectare return is much higher than crops such as paddy, cotton, and wheat. The percent net return of sugar cane was 245% higher than the net return from paddy and wheat together and 252% higher than the net return for cotton and wheat taken together, during the average period of 2013–14 to 2015–16 (CACP 2017). Due to this reason, despite huge cane arrears, farmers prefer to cultivate sugar cane in comparison to other crops.

Along with the above-mentioned factors, sugar cane cultivation has also adversely affected the environment and groundwater table, as it is a highly water-intensive crop and is therefore not suitable for cultivation in dry and arid areas. For example, the water requirement in Maharashtra for producing 1 kg of sugar is 2,068 litres (Narayanamoorthy 2013). This crop occupying only 4% of the cultivated area receives 64% of irrigated water in Maharashtra (Gulati and Mohan 2018).

Therefore, there is an urgent need to limit or reduce sugar cane production in India, especially in arid regions, in order to promote sustainable agriculture. This can be done by implementing crop diversification programmes to assist shifting to other environmentally friendly crops. Encouraging the diversification will also help the sugar sector in general to maintain its market competitiveness.

In India, crop diversification schemes have been in place for years to reduce reliance on crops like paddy and tobacco. One of the most prominent programmes is the Rashtriya Krishi Vikas Yojana, which incentivises diversion of area from water-intensive schemes to other crops in states like Punjab, Uttar Pradesh, and Haryana, by providing assistance towards land development, farm mechanisation, establishment of agro-based food processing units, and marketing support (CDP 2014). In addition, the government also encourages a shift to pulses, coarse cereals, and oilseeds, under various programmes like the National Food Security Mission and National Mission on Oilseeds and Oil Palm, due to their water efficiency (PIB 2015). States, like Maharashtra, have launched specific crop diversification models to reduce sugar cane production, thereby pushing for cultivation of coarse cereals instead (Khapre 2018).

Thus, it is advisable to implement a blue box-compliant policy for the Indian sugar sector with a specific sub-scheme for acreage reduction in dry and arid regions of the country. Such a move will not only help reform the sugar sector but will also be a positive step in promoting long-term sustainable agriculture models. Furthermore, payments made towards this sub-scheme will qualify as green box payments, as they can be notified as payment under the environmental programmes
(Annexure 2 of the AoA).

Conclusions

Developing country members are facing many challenges in implementing domestic support policies for their agricultural sectors due to the constraining provisions of the AoA. Over the years, the flexibility to support their agriculture has been diminishing due to outdated methodologies as well as the lack of AMS entitlements. In contrast, farmers in these countries are braving multiple challenges, such as price volatility, small landholdings, lack of irrigation and institutional credit, indebtedness, marketing problems, etc. Owing to these challenges, the governments in developing countries are forced to intervene in various forms, such as price support measures, to protect the interest of low-income and resource-poor farmers (Sharma 2016). However, some of these interventions fall under the restrictive provisions of the amber box.

Developing country members have constantly pushed for reforms under the Doha round to make the AoA more suited towards their needs, but to no avail (Kanth 2011). Like many other developing members, India’s agricultural policy, too, is being questioned and challenged at the WTO. A recent dispute by Australia, Brazil, and Guatemala on sugar-related measures highlight the limited and minuscule policy space under the amber box. Given these challenges, this paper made a modest attempt to examine the feasibility of implementing a blue box programme for India’s sugar sector, which is compatible with the current socio-economic situation of the country. Until recently, the blue box was only utilised by the developed country members to provide support to their agricultural sectors, which otherwise would have been covered by the provisions of the amber box. China became the first developing member to use this box to support corn and cotton farmers in 2016 and 2018 respectively.

Direct payment, under the blue box, to support agriculture should be for production-limiting programmes, based on fixed area and yield or up to 85% of the base level of production or fixed number of livestock head. In this paper, we found that it is feasible for India to implement a blue box programme for the sugar sector based on 85% of the production in 2018–19. Under this programme, 340 million tonnes of sugar cane would be entitled for the support under this box. As there is no restriction on the type of payment, price support or deficiency payments can be implemented suited to the existing domestic conditions. Owing to the problems emerging from sugar cane cultivation, namely water scarcity and other environmental problems, the Indian government should implement crop diversification programmes. These programmes will mitigate the problems arising due to sugar cane cultivation and make it more sustainable. Given the stalemate in the Doha round, constraining provisions of the amber box and the prevailing livelihood distress among farmers, it is worthwhile to explore the blue box, as an alternative to the amber box, for reforming and addressing the problems in the sugar sector.

Note

1 Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under the support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009.

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PIB (2015): “Soft Loan to Sugar Mills to Facilitate Payment of Cane Dues of Farmers for the Current Sugar Season, 2014–15,” Press Information Bureau, Ministry of Consumer Affairs, Food and Public Distribution, http://pib.nic.in/newsite/PrintRelease.aspx?relid=124955.

Sharma, S K (2016): “Domestic Support under the Agreement on Agriculture,” The WTO and Food Security: Implications for Developing Countries, Singapore: Springer.

— (2018): “WTO and Policy Space for Agriculture and Food Security: Issues for China and India,” Agricultural Economics Research Review, Vol 31, No 2, pp 207–19.

Sharma, S K, A Dobhal, S Agarwal, and A Das (2020): “Demystifying Blue Box Support to Agriculture under the WTO: Implications for Developing Countries,” Working Paper No 62, CWS/WP/200/62, Centre for WTO Studies, Delhi.

USTR (2016): “United States Challenges Excessive Chinese Support for Rice, Wheat, and Corn,” Office of the United States Trade Representative (USTR), Executive Office of the President of the United States, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2016/september/united-states-challenges.

US (2018): “Statements by the United States at the Meeting of the WTO Dispute Settlement Body,” Geneva, Dec18.DSB_.Stmt_.as-deliv.fin_.public.pdf (gpa-mprod-mwp.s3.amazonaws.com).

Wei, R (2017): “China’s Corn Policy Shifting into Producer Compensation System: From Price Support to Direct Payment,” 1 April, Norinchukin Research Institute Co Ltd, https://nochuri.co.jp/pdf.php?path=english/pdf/rpt/_20171121.pdf.

WTO (1995a): Domestic Support Notification of United States DS:1, Document No G/AG/N/USA/10.

— (1995b): India’s Supporting Tables Relating to Commitments on Agricultural Products in Part IV of the Schedules, Document Number G/AG/AGST/IND.

— (2001): Domestic Support Notification of Japan DS:2, Document No G/AG/N/JPN/62.

— (2009): Committee on Agriculture: Response to Question Raised by Canada and United States under the Review Process, Question ID 55026, Document No G/AG/R/55.

— (2011): Domestic Support Notification of Bangladesh DS:1, G/AG/N/BGD/3.

— (2012): Committee on Agriculture, Special Session, G33 Proposal on Some Elements of TN/AG/W/4/Rev.4 for Early Agreement to Address Food Security Issues; Document No JOB/AG/22.

— (2014): Domestic Support Notification of Japan DS:2, Document No G/AG/N/JPN/192.

— (2015a): Domestic Support Notification of Norway DS:2, Document No G/AG/N/NOR/80.

— (2015b): Trade Policy Review of Japan, Report by the Secretariat, Document No WT/TPR/S/310.

— (2016): Domestic Support Notification of India DS:1, Document No G/AG/N/IND/13.

— (2018a): Communication from Australia: India’s Measures to Provide Market Price Support to Sugarcane; Document No G/AG/W/189.

— (2018b): Communication from the United States of America: Certain Measures of India Providing Market Price Support to Rice and Wheat; Document No G/AG/W/174.

— (2018c): Communication from the United States of America: Certain Measures of India Providing Market Price Support to Cotton; Document No G/AG/W/188.

— (2018d): Communication from Australia: India’s Measures to Provide Market Price Support to Sugarcane; Document No G/AG/W/189.

— (2018e): Domestic Support Notification of China DS:2, Document No G/AG/N/CHN/48.

— (2018f): Domestic Support Notification of China DS:2, Document No G/AG/N/CHN/49.

— (2018g): Domestic Support Notification of Turkey DS:1, Document No G/AG/N/TUR/21.

— (2018h): Domestic Support Notification of Uruguay DS:1, Document No G/AG/N/URY/63.

— (2018i): Summary Report of the 89th Regular Meeting of the Committee on Agriculture, Document No G/AG/R/90.

— (2019a): Domestic Support Notification of Norway DS:2, Document No G/AG/N/NOR/103.

— (2019b): Domestic Support Notification of Brazil DS:1, Document No G/AG/N/BRA/52.

— (2019c): Arguments of Third Parties: India, China–Domestic Support for Agricultural Producers, Annexure C-7, Document No WT/DS511/R/Add.1.

— (2019d): Communication from Canada and the United States of America: Certain Measures of India Providing Market Price Support to Pulses, Including Chickpeas, Pigeon Peas, Black Matpe, Mung Beans and Lentils, Document No G/AG/W/193.

— (2019e): Summary Report of the 90th Meeting of the Committee on Agriculture, 26–27 February 2019, G/AG/R/91, para 1.3.7.1.