Author: Rajendra Jadhav and Mayank Bhardwaj
NEW DELHI, Feb 9 (Reuters) – The United States and India have released a provisional framework for a trade deal, paving the way for a deal to lower tariffs, reconfigure energy relations and deepen economic cooperation as both sides seek to realign global supply chains.
The joint India-US statement indicated that New Delhi is resisting Washington’s efforts to broadly open its agricultural markets. However, India agreed to lower trade barriers for some agricultural products, drawing criticism from farmers and opposition parties.
Who benefits and who loses from India’s decision to allow import of DDGS and soybean oil?
India is expected to allow imports of protein-rich distillers dried grains with solubles (DDGS), a by-product of ethanol made from corn and other grains, from the United States, adding to a glut in the domestic market.
Increased DDGS supply could benefit India’s nearly $30 billion poultry industry, where feed costs account for approximately 60-70% of total production expenses, by helping reduce costly feed purchases.
However, domestic oilseed processors and soybean growers could suffer if U.S. imports increase.
India already has a glut of DDGS and weakening demand for oil meals such as soybean meal, putting pressure on Indian oilseed prices and prompting farmers to switch from soybeans and peanuts to corn and rice, despite New Delhi’s push to grow the oilseeds and curb imports.
As the supply of DDGS further increases, after India achieves the 20% biofuel blending target, Indian ethanol producers are already trapped in idle capacity and slowing demand, and may face a decline in DDGS sales revenue in the domestic market.
The prospect of duty-free imports of soybean oil from the United States has caused some concern in India. However, under the current framework, duty-free soybean oil imports are only allowed under tariff-rate quotas, meaning quantities above the quota will face standard tariffs, a move aimed at protecting domestic producers.
Will duty-free cotton imports affect Indian farmers?
India currently imposes an 11% tariff on cotton imports, and allowing duty-free imports from the world’s largest fiber exporter could put pressure on domestic prices.
However, the impact is expected to be limited as the government only allows imports of extra-long-staple cotton, and that too subject to quotas.
Although India is the world’s second largest cotton producer, it imports extra-long-staple cotton from the United States, Egypt, Brazil and Australia, making it difficult to meet the textile industry’s demand for extra-long-staple cotton.
Will preferential import of apples and dry fruits threaten Indian farmers?
India is the world’s fifth-largest apple producer, but domestic supplies cannot meet growing demand due to population growth and increasing prosperity.
New Delhi imports about 500,000 metric tons of apples every year from Iran, Türkiye, Afghanistan, the United States and Chile. Under the trade deal with the US, imports will be allowed at a preferential tariff of 25% and a minimum import price of Rs 80 per kilogram, effectively preventing shipments from falling below Rs 100 per kilogram and helping to protect Indian farmers.
Consumption of dry fruits such as walnuts, almonds and pistachios is also on the rise in India. Domestic production of these commodities is limited, so preferential imports are unlikely to affect local farmers.
Are Indian farmers likely to benefit from the trade deal?
India’s tea, coffee, spices and fruit growers will benefit from the trade deal as the US has given duty-free access to these products.
The reduction in rice import duty to 18% is also expected to support exporters of premium basmati and non-basmati varieties.
(Reporting by Rajendra Jadhav and Mayank Bhardwaj; Editing by Anil D’Silva)