WTO norm and Indian practice on food security: An angle of dichotomy

The Agreement on Agriculture (AoA) was considered to be the starting point for liberalizing trade in agriculture. This framework consists of three main pillars i.e. market access, domestic support, export subsidies.  Domestic support measures are basically categorized in three different general boxes, depending on their trade distortive potential. Domestic support measures in the green box shall meet the fundamental requirement that they have no, or at most minimal, trade-distorting effects on production. To meet this requirement, the AoA stipulates general and policy-specific criteria.

According to the 2017 Goble Hunger Index score, India ranked 100 out of the 119 countries listed and at the same time, Food and Agriculture Organization of the United Nations (FAO) concluded that there has been a rise in world hunger. The absolute number of undernourished people, i.e. those facing chronic food deprivations has increased to nearly 821 million in 2017, from around 804 million in 2016. In the light of above conclusion, food security for mankind’s still a challenge at world level. All the institutions including the State, UNO as well as WTO are under the moral obligation to facilitate the food security for all.

Overall, India’s stake is much higher than developed nations as 55 percent of Indian population is directly employed in agriculture sector. At present all support to farmers is covered by the domestic support categories which are exempt from reduction commitments under the AoA. New MSP and government plan to double the income of farmers may be critical in the context of WTO norms. Public stockholding issue is a major challenge in WTO forum and the amendment proposed by India in AoA must be considered at global platform as a desirable change.

Government of India enacted National Food Security Act, 2013 with the objective to provide food and nutritional security to the citizens of India. Under this Act, Targeted Public Distribution System (TPDS) includes up to 75% of the rural population and 50% of urban population, with uniform entailment of 5 kg per person per month at the subsidized price of Rs.3, 2 and 1 per kg for rice, wheat and coarse grains respectively. The Act is now being implemented in all the States/UTs and more than 80 crore people are covered under the Act. Although developing countries have the option of a wide range of domestic support exemptions in the WTO, AoA as it stands now, Indian food security law is considered contrary to the norm of WTO. Therefore issue regarding public stockholding in WTO becomes an unresolved question at WTO level and the amendment proposed by India in AoA is considered by developing countries as a desirable change. The conflict of viewpoints of developed and developing countries is based on very clear reasons. It is thus important for us to present justification for establishing as to how Indian food security scheme is excluded from the reduction commitments. In this context present paper highlights the Dichotomy between WTO Norm and Indian Practice on Food Security and also attempts to find out a proper formula for resolving the issues regarding public stockholding for the purpose of food security at WTO level.

The existing WTO disciplines on agriculture, and some proposals to strengthen these, are far from perfect. The subsidies provided  to  farmers  include first, Non-Product Specific  subsidies such  as  those  provided  for irrigation,  electricity,  credit,  fertilizers,  seed  etc. and Second, Product  Specific  Subsidies (price support). The sum of these two is termed as Aggregate Measurement of Support (AMS), also called Amber Box. The Amber Box subsidies are considered to be trade  distorting  and   were  entitled  to  progressive  reduction  commitments,  base  year  being  1986-87. The maximum limit  for  the  total  AMS is  fixed  at 5 percent of the value  of  domestic  agricultural  output  for  developed  and  10 percent  for  developing  countries.

Clear difference between WTO norm and Indian practice exist in the context of food security and public stockholding. In reference to public stockholding, the AoA stipulates general and policy-specific criteria in Annex 2, para 3 which include First, the accumulation and holding of private or governmental stock must be purchased by the government at the current market price and not sold below the current domestic market price; Second, there must be predetermined targets for stock accumulation relating solely to food security objectives; and, Third, there must be financial transparency.

In reference to expenditures on domestic  food  aid  programs policy-specific criteria in Annex 2 para 4 includes First, to provide domestic food aid to sections of the population in need, Second, eligibility to receive the food aid shall be subject to clearly-defined criteria related to nutritional objectives; Third, food purchases by the government shall be made at current market prices; and fourth, the financing and administration of the aid shall be transparent. For the purpose of food aid sales at subsidies prices is permitted under WTO.

Regardless of WTO norms, the National Food Security Act (NFSA) provides for legal rights and entitlements of up to 75% of the rural population and up to 50% of the urban population. Apart from this, all the children below the age of 14 years and every pregnant woman and lactating mother have statutory right to food under the Act. For the purpose of food aid subsidized prices are `3, `2 and`1 per kg for rice, wheat and coarse grains respectively.  Food grains are procured in India at the Minimum Support Price (MSP) fixed by the Government. For Khariff Marketing Season (KMS) 2018-19, the MSP for Common and Grade ‘A’ paddy is fixed at ` 1750/- and ` 1770/- per quintal respectively. The MSP of wheat for RMS 2018-19 has been fixed at ` 1735/- per quintal.

Government of India for the purpose of stockholding as well as food aid always perches the food grains at administrative price and sell below the market prices. This practice is contrary to the WTO norm. Therefore, India argue that the requirements of these policy measures under the AoA  are  excessively  restrictive. WTO norm should not be considered just in the context of developing and least developed countries because it would be difficult for them to implement price support as well as other product specific budgetary support policy for food security in the immediate future due to shrinking policy space as a result of binding commitments related to agriculture sector.