India to Spend Tens of Billions in 2023 to Incentivize Rice Production, Further Violating WTO Obligations

India Rice Exports by Trade Year graph
Seeing the sobering results
Mar 13, 2023
NEW DELHI, INDIA – Last week, the U.S. Department of Agriculture (USDA) reported in the March World Agriculture Supply and Demand Report that India will continue to dominate the world rice trade in the 2022/23 marketing year, projecting that they will break their own world record with 22.5 million metric tons (MT) of rice exports on tap.

In May 2022, the U.S. government along with nine other governments initiated technical consultations with India regarding their egregious trade distorting rice subsidies that feed into their public stockholding program and violate the terms of the Bali Peace Clause.  However, to date, the U.S. government has not taken formal action to address India’s explicit World Trade Organization (WTO) violations.

The rise in exports shown above is not coincidental but corresponds with significant increases in production which corresponds with the Indian government’s significant increases in the price they pay farmers to buy their paddy rice for government stocks.  According to USDA figures, in 2010/11, that price roughly translated to $120 per MT of paddy rice whereas the 2022/23 price is roughly translated to $259 per MT of paddy rice.

A government-guaranteed price of $259 per MT of long grain paddy rice converts to about $13.16 per hundredweight coupled with a series of input subsidies that cover as much as 85 percent of the total cost of production.  USDA estimates that the Indian government will purchase as much as 59 million MT of paddy rice from Indian farmers this year, which equates to $15.28 billion in just procurement costs alone.

“Just six months ago, the Indian government had imposed export restrictions on rice because of alleged food shortages, but within weeks they had put themselves on track for another record crop year and another record year of rice exports, continuing to penetrate markets across the globe, including the United States, with their artificially low-priced rice,” said Bobby Hanks, Louisiana rice miller and chair of the USA Rice International Trade Policy Committee.

Despite India’s claims around their domestic food security last year, they continued to export a record amount of rice and crowd out other, more reliable exporters, worsening uncertainty for needy rice importers.  At the same time, India was making deals with Russia to funnel fuel and fertilizer into their country while most of the world stood in solidarity with Ukraine.

“India’s policies not only violate their WTO commitments, but also impact the livelihoods of those that produce or consume rice across five other continents,” Hanks added.  “It is long overdue for countries that are concerned about the future of the multilateral trading system and the livelihoods of their producers to address India’s protectionist policies through formal dispute settlement.  We encourage the U.S. Trade Representative to initiate a dispute settlement action to help American farmers and our counterparts compete on a level playing field and prevent further industry consolidation.”