Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

India’s ‘wheat waiver’ WTO demand is risk-fraught

Note4Students

From UPSC perspective, the following things are important :

Prelims level : WTO waiver

Mains level : Paper 3- Public Stockholding of Food issue at WTO

Context

The WTO ministerial meeting in June at Geneva did precious little to address the issue of public stockholding of food.

Public stockholding issue at WTO

  • India’s PSH policy is based on procuring food from farmers at an administered price (minimum support price or MSP), which is generally higher than the market price.
  • PSH’s’ twin objectives: The PSH policy serves the twin objectives of offering remunerative prices to farmers and providing subsidised food to the underprivileged.
  • Trade distortion subsidy: Under WTO law, such price support-based procurement from farmers is counted as a trade-distorting subsidy, and if given beyond the permissible limit, breaches WTO law.
  • India in the World Trade Organization (WTO) — and rightly so — has been to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).
  • Peace clause: Currently, India has temporary relief due to a ‘peace clause’ which bars countries from bringing legal challenges against price support-based procurement for food security purposes.
  • The WTO ministerial meeting in June at Geneva did precious little to address this issue.
  •  India’s concerns about the PSH issue have been taken on board.

India’s concerns

  • For India, the real issue is not about maintaining adequate food stocks, which WTO rules do not prohibit, provided food is stocked by employing non-trade distorting instruments such as providing income support to farmers (cash transfers independent of crop production).
  • Use of MSP: India’s concern is that it should have the policy space to hold public food stocks using the MSP, which is a price support instrument.
  • However, there is no mention of price support in the Geneva declaration.
  • India’s demand for a permanent solution to the PSH policy has acquired a new dimension.
  • India insists that it should also be allowed to export food, most notably wheat, from the pool of the foodgrain procured under the MSP.
  • However, WTO law proscribes countries from exporting foodgrain procured at subsidised prices.
  • Paragraph 4 of the 2013 WTO decision on PSH for food security purposes, clearly states that countries procuring food for food-security purposes shall ensure that such procured food does not “distort trade or adversely affect the food security of other Members”.
  • The same spirit is reflected in paragraph 10 of the Geneva ministerial food security declaration, which states that countries may release surplus food stocks in the international market in accordance with WTO law.
  •  However, it is very unlikely that such a request will be acceded to.
  • As per Article IX.3 of the WTO Agreement, waivers can be adopted only in “exceptional circumstances”.

Way forward

  • Developed countries have historically opposed India’s PSH programme as they apprehend that India might divert some of its public stock to the international market, thus depressing global prices.
  • India actively pushing for exporting food from its official granaries gives fresh ammunition to the PSH solution opponents.
  • Thus, India should revisit its stand on asking for a waiver for wheat exports from its public stockholding, which, in any case, was not a part of India’s PSH policy.
  • Spending scarce negotiating capital on this issue might dilute India’s core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security and providing remunerative prices to the farmers.
  • Negotiations at the WTO require crystal clarity of the core objectives that should be relentlessly pursued.
  • Adding newer objectives and shifting goalposts might result in falling between two stools.

Conclusion

Instead of asking for the waiver to export wheat from public stockholding, the laudable objective of helping countries facing food crises can be accomplished by strengthening India’s commitment to the United Nations World Food Programme.

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