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India won't budge on food subsidy at WTO: Govt

Says procurement prices at 1988 levels, should be in line with 21st century prices.

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Three days ahead of the World Trade Organization’s ministerial in Bali, India made it clear that it will not budge an inch over its right to enact the food security law in the country. The statement came amid speculation that India has given in to the demand of developed nations to agree to the 4-year ‘peace clause’, which controls India’s rights to enact the law.

“What we give to our poor people is our right. That is a sovereign space... it is sacrosanct and non-negotiable,” said Anand Sharma, Union minister for commerce and industry. “It has been speculated that India has agreed to only four years of protection (under the peace clause)... Let me put the record straight that India’s final position will be made clear in the ministerial statement.”

The WTO committee has proposed the peace clause under which India, along with other developing countries, will have a four-year respite from the harsh provisions of the WTO law that limits market distorting farm subsidies at 10% of the aggregate production.

According to WTO guidelines, implementation of India’s Food Security Act may fall under market distorting subsidy since it will require the government to procure food-grain at market price and sell at below market price to two-thirds of the country’s population. Developed countries like the US are dead against such structure as this may hurt the interest of their farmers in the long run.

While India claims that the subsidised food-grain would be used to build up a stockpile for domestic consumption, the developed nations feel this can be shipped outside to distort market rate worldwide.

Sharma said that under the Uruguay round of agreements, the external reference price -- also known as minimum support price -- for procurement of foodgrain was settled at the prices of 1986-88. The prices of food-grain have gone up many folds since. He felt the procurement prices should be in line with the 21st century prices or there should be a deflationary mechanism to arrive at the real price of procurement for food-grain by the government. “ The Uruguay round of agreements held in 1994 was unfairly nodded in favour of some countries,” added Sharma.

In August this year, the UPA government had passed the FSA, which aims to provide minimum food entitlements to 67% of the country’s population and requires nearly $20 billion as subsidy, which will make India breach the threshold of WTO line for farm subsidies.

In its demand, India has said the draft on public stock holding – which deals in the Food Security Act of India -- should have interim solutions until the next ministerial conference to be held in 2017 under the Doha round of negotiations. Among other important issues being negotiated at the WTO meet in Bali are trade facilitation, export competition, tariff-rate quota (TRQ) administration and least development countries’ support.

While India has endorsed the settled draft on trade facilitation and export competition, there are in all 72 brackets (unagreed) points in the TRQ administration draft.

The issue
According to WTO guidelines, implementation of India’s Food Security Act may fall under market distorting subsidy.

Developed countries like the US are dead against such structure as this may hurt the interest of their farmers in the long run.

India claims that the subsidised food-grain would be used to build up a stockpile for domestic consumption.

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