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India's food stockpiling and WTO stand-off

Tuesday, 29 July 2014 - 7:57pm IST | Place: Mumbai | Agency: Reuters
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India threatened to block a worldwide reform of custom rules last week, saying it wants an agreement on food subsidies and stockholding to run parallel to the trade facilitation pact.

With grain silos spilling over, exports on the rise and an avowed market champion for prime minister, New Delhi`s threat to trash the trade deal in the name of food security and farm subsidies appears puzzling.

But government officials say Prime Minister Narendra Modi is prepared to brazen out global outrage to seize a historic opportunity to build a rural power base as farmers` best ally and banishing memories of humiliating national food shortages.

Following are key facts on India`s food stockpiling and its stand at WTO.

GRAIN STOCKPILES & SUBSIDIES

* India rice reserves stood at 21.2 million tonnes as of July 1 and wheat stockpiles were at 39.8 million tonnes -- more than double the government’s buffer requirements for both commodities.

* India, the world’s second biggest rice and wheat consumer, has been annually spending 900 billion to 1 trillion rupees (USD 16.63 billion) on procurement of grains from farmers every year. 

* But this cost will rise to 1.15 trillion rupees in the financial year to March, 2015 as the world’s second most populous nation is rolling out the Food Security Act. The act promises subsidised grains to some 810 million people, compared with about 318 million covered under the programme earlier.

* In the past 10 years, the government has more than doubled the price it pays farmers for rice and wheat. The country paid about 14,000 rupees for one tonne of wheat this year and about 13,600 rupees for a tonne of rice.

GRAIN PRODUCTION AND EXPORTS

* India, the world’s second biggest grain producer, has seen its rice output climb to 106.3 million tonnes last year from 83 million tonnes in 2004, according to the US Department of Agriculture data. Wheat production rose to 93.5 million tonnes this year from 72 million tonnes in 2005.

* India emerged as the world’s biggest rice exporter in 2013, selling more than 10 million tonnes and edging out Thailand. In the year to June 2013, the country’s wheat exports jumped to 8.7 million tonnes, a five-fold gain from a year earlier. 

* Still, India has faced stiff competition from Thailand in the global rice market in recent months while bumper wheat production in the Black Sea region has pushed the South Asian nation out of business.

INDIA`S POSITION

* India wants an agreement on food subsidy and stockholding to run parallel to the trade facilitation pact. It wants setting up of a dedicated special session of the committee on agriculture to find a permanent solution on public stockholding for food security by December 31, 2014. 

* New Delhi is seeking to update the base of calculating food subsidies from 1986-88 prices to the current level, taking into account inflation and currency movements.

AGREEMENT IN BALI ON FOOD STOCKPILING

* In December 2013, the WTO members in Bali agreed on an interim solution to shield food stockpiling programmes in developing countries such as India, so that they would not be legally challenged even if the limits on trade distortion were breached.

* They agreed on an interim solution until a permanent one is reached in four years.

* Under the previous WTO pact, developing countries are allowed to buy grains from farmers at support prices to build stocks, subsidising up to 10 % of the value of output. 




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