MC EXCLUSIVE Minimum import price to anchor India’s farm protection in US trade deal

Maize and other agricultural products remain among the most sensitive items in trade discussions

• India to rely on minimum import prices to protect sensitive farm products
• Duty cuts have limited impact if minimum import prices remain in place
• Maize, fruits, and dry fruits to stay protected via price-based controls

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India is likely to continue relying on minimum import prices (MIPs) rather than headline customs duties to protect its agricultural sector under the recently announced India–US trade deal, senior government sources said, signalling that politically sensitive farm products will remain insulated even as market access is explored in other areas.

“Where a minimum import price applies, reducing the duty does not necessarily make imports cheaper, as assessments are done on the floor price,” a senior government source told Moneycontrol. “Duty cuts have limited impact on sensitive farm products, if MIPs continue,” he said.

Why duty cuts may not affect farm markets

In the India–US trade deal, Indian authorities have indicated that MIPs – rather than headline customs duties – will remain the principal instrument to shield sensitive agricultural products. Government sources said this does not necessarily imply that duties have already been lowered, but that even where tariff adjustments are considered, their impact on farm markets would be limited as long as price floors continue to apply.

In practical terms, officials explained, duty cuts alone do not alter market outcomes because imports priced below the notified minimum import price are still assessed at the floor price, effectively preventing low-cost supplies from entering the domestic market.

Maize and fruits remain sensitive

Government sources said maize and other agricultural products remain among the most sensitive items in trade discussions, given their role as staple crops and as key inputs for feed and processing industries. Fruits and dry fruits are also treated cautiously, reflecting concerns over domestic price stability and farmer livelihoods.

“These are sectors where sudden exposure to cheaper imports can quickly depress domestic prices,” the senior government source said. “That sensitivity has not changed, irrespective of the trade talks.”

While some products, such as walnuts, are viewed as relatively less contentious due to limited domestic production, most fruit categories and staples are expected to remain protected through price-based controls rather than tariff liberalisation.

How MIP protects farmers

MIP is a government-notified floor value, below which imports of a particular product cannot be assessed by customs. By preventing cheaper overseas supplies from entering the market at artificially low prices, the mechanism helps stabilise domestic prices and protect farm incomes.

Government sources said this is particularly important in agriculture and horticulture, where output is seasonal and perishable, and farmers - especially small and marginal producers -- are highly exposed to sudden price swings caused by import surges.

How MIP blunts tariff cuts

Under the MIP framework, the government fixes a floor price for certain sensitive imports, and customs authorities assess duty on this price rather than the declared transaction value. This ensures that tariff reductions or exemptions do not translate into lower landed prices.

For instance, if apples are imported at a 55 percent tariff, and the notified minimum import price is Rs 80 per kg, customs will calculate duty at Rs 80 per kg.

“Unless the floor price itself is changed, the effective level of protection remains,” the government source said.