Mint Explainer | How an obscure item in the India-US trade deal is stirring the pot

This has rekindled the debate on the use of transgenics in the farm sector, in addition to concerns that imports may indirectly impact farm gate prices for Indian soy and corn farmers. Mint explains what’s at stake.

What is DDGS?

DDGS is a protein-rich byproduct of ethanol manufacturing using grains like corn and rice. The US mostly uses GM corn for producing ethanol. Therefore, DDGS is a GM-based animal feed used for cattle, poultry, and fisheries.

In India, ethanol manufacturers produce DDGS, but this is made using non-GM corn (maize) and rice. As per the trade agreement, India will allow duty-free import of DDGS, but in limited quantities.

India has not granted direct market access to US-grown GM soybean and maize. But it has allowed the import of DDGS feed and soybean oil, which India already imports from countries like Brazil and Argentina that grow GM soy.

So, what are the objections?

The opposition has criticised this move, citing the fact that India has yet to allow the use of transgenic technologies in food crops (it has only allowed GM cotton to date). Congress lawmaker and former environment minister Jairam Ramesh termed it a ‘backdoor entry’ of GM crops in food.

Bharatiya Kisan Sangh, a farmer union affiliated to the Rashtriya Swayamsevak Sangh, the ideological parent of the ruling BJP, has also objected to the entry of DDGS. In addition, experts have raised concerns that imported feed can depress farmgate prices for Indian farmers growing soybean and corn, which are mostly used to manufacture animal feed. In addition, ethanol makers may face a dip in profitability as they have to compete with US-origin DDGS.

How will this impact Indian dairy produce?

Research shows that using GM-based feed does not pass on foreign genes to the milk. The European Union allows import of GM feed for its dairy cattle with a labelling mandate when GM materials are present in feed or food items is excess of 0.9%.

Within India, the food safety authority mandates that import of 24 food items (including soy and corn) have to be accompanied with a GM-free certificate. But the list does not include either GM-origin soybean oil or DDGS.

Is DDGS a big giveaway?

Not really. Corn-based DDGS from Indian ethanol makers is currently cheaper than the landed price of imported DDGS. So, imports are likely to be limited. But US-made DDGS is of better quality (due to lower levels of aflatoxins, a fungus). It remains to be seen whether Indian feed makers will replace home-produced DDGS with imports.

Overall, India has done well for its farmers by not allowing imports of high-yield US corn, soy and ethanol for fuel. It has not allowed imports of dairy products and cereals. Further, India has been able to lower duties on shrimps, coffee and rice which are major export items.

The interest of apple growers has also been protected with a mix of import duties and a minimum import price. On balance, the deal is unlikely to worsen the trade surplus India enjoys with the US in the agriculture sector ($3.8 billion in 2024).

What are the unknowns?

The trade negotiations are ongoing and many aspects are not known. For instance, it remains unclear whether India will allow import of soybean oil at zero duty (the effective duty on crude oil import is 16.5% currently).

As per the interim agreement, India has promised to eliminate or lower tariffs on ‘additional products.’ But it is not clear what these products are. Further, India has agreed “to address long-standing non-tariff barriers to the trade in U.S. food and agricultural products.”

Non-tariff barriers can include specific quotas or quantities of a particular commodity to be imported, product and safety standards, as well as the contentious issue of GM products. The final agreement will clarify these things.