India Draws the Line on Corn, Ethanol, Soybean & Dairy in Trade Talks with US
As
India and the United States continue negotiations on a long-pending trade deal,
four key agricultural sectors have emerged as major sticking points: corn,
ethanol, soybeans, and dairy. New Delhi has made it clear these are
non-negotiable areas — or “red lines” — especially as pressure mounts from
Washington to open up Indian markets further.
US
President Donald Trump has called for a “very big” trade agreement with India
that would reduce tariffs and create fairer competition for American products.
But Indian officials, including Finance Minister Nirmala Sitharaman, have
strongly emphasized that the livelihoods of Indian farmers will not be
compromised.
“There’s
no way we could do anything that would weaken our agriculture or our farmers’
positions,” she said in a recent interview.
Here’s
a closer look at the four contentious commodities that lie at the heart
of the trade talks:
1.
Corn (Maize): A GM Debate
The
United States is the world’s top corn producer and exporter, much of which is
genetically modified (GM). Over 94% of US corn is grown using GM varieties
designed to withstand herbicides and resist pests.
In
contrast, India neither grows nor allows the import of GM corn. Current Indian
import duties stand at 15% for up to 0.5 million tonnes annually, jumping to
50% beyond that limit.
A
proposal under discussion involves allowing GM corn imports solely for
producing ethanol — not for direct consumption or animal feed. The idea is to
keep such imports out of the food chain. India already relies on corn for 46%
of its ethanol blending, surpassing sugarcane and broken rice.
However,
sugar mills are wary. They’ve seen their share in ethanol production decline
sharply and fear imported GM corn could further reduce their role in the fuel
blending programme. There are also political sensitivities: Bihar, heading for
elections soon, is one of India’s top corn-producing states. Any move to open
corn imports could trigger a backlash from farmers.
2.
Ethanol: Fuel or Foe?
The
US dominates global ethanol exports, with India ranking as its third-largest
buyer after Canada and the UK. Yet, India permits ethanol imports only for
industrial or medicinal use, and strictly not for fuel blending.
The
US wants that to change.
But
allowing fuel-grade ethanol imports runs counter to India’s own objectives —
namely, cutting down on fuel imports and promoting the use of domestic crops
like sugarcane and maize for ethanol production. With a projected demand of
over 11 billion litres of ethanol in 2025 — mostly for fuel — India is likely
to continue shielding this sector from foreign competition.
3.
Soybeans: The GM Wall Stands Firm
Soybean
is another flashpoint. Nearly all soy cultivated in the US and Brazil is GM — a
variety banned from import in India in its raw form. While India allows GM
soybean oil, it bars the import of whole beans and the protein-rich
de-oiled cake (DOC) left after oil extraction.
A
NITI Aayog paper had once proposed that India could import GM soybeans to
extract oil for domestic use and export the DOC. However, the suggestion was
quickly withdrawn.
India’s
soybean farmers, mainly in BJP-ruled states like Madhya Pradesh, Maharashtra,
and Rajasthan, are already struggling with low prices. Permitting GM soybean
imports now could be politically explosive.
4.
Dairy: Cultural and Economic No-Go Zone
The
US is not a dominant player in global dairy exports, but it’s pushing for
access to India's vast market. India, however, remains protective of its dairy
sector — and not just economically.
Apart
from high import duties (up to 60% on milk powder), India requires that all
imported dairy must come from animals not fed with products derived from
slaughtered bovines — a restriction the US claims is driven by “religious and
cultural grounds”.
Dairy,
deeply linked to India’s rural economy and religious sentiment, is a firm red
line. While it’s unlikely India will relax these norms, the sector could become
a bargaining chip — used to negotiate more favorable terms on other
issues like ethanol or corn.
The
Bigger Picture
At
the heart of this standoff is a familiar trade dilemma: balancing economic
cooperation with domestic political realities. The Indian government, facing
upcoming elections in several states and an agriculture-heavy voter base, is in
no mood to compromise on farm-related issues.
Meanwhile,
Washington is unlikely to drop its demands easily, especially with the Trump
administration pushing to reduce trade deficits and expand US exports.
The
road to a comprehensive trade deal may still be open — but with corn, ethanol,
soybeans, and dairy on the table, the two sides clearly have some hard
bargaining ahead.
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