India, China, Indonesia want cap on foodgrain procurement removed

Maintaining its hard posture on food security at the World Trade Organisation (WTO), India has said that Government procurement of foodgrain at non-market prices should be allowed without limits.

China, Indonesia and Turkey were some of the other members of the G-33 alliance of developing countries in agriculture which pushed for exclusion of support prices for foodgrain from the list of trade-distorting subsidies.

The proposal, discussed in the first session on finding a “permanent solution” to India’s (as well as some other developing countries) problem of ensuring food security without bending global trade rules was, however, opposed by some such as the US, the EU, Pakistan, Australia, Japan, Argentina and Paraguay.

“While India and some other G-33 members argued that unlimited Government food procurement was necessary to ensure food security to poor, those objecting said that without adequate disciplines it could lead to unintended consequences such as hurting the food security of other countries,” a Government official told BusinessLine.

WTO members are supposed to find a “permanent solution” by the end of this year as per the agreement reached in the Bali Ministerial meeting in December 2013, which was later re-negotiated by India.

New Delhi, meanwhile, has got a short-term solution as part of the Bali deal where members have agreed not to take legal action against it in case subsidy cap is breached. Since the reprieve granted to India is subject to a number of conditions including sharing of numerous data and details, India wants a simple ‘permanent solution’ to the problem as soon as possible.

“India and the G-33 want that on account of public stockholding, whatever amounts of subsidy go beyond de minimis (the subsidy cap fixed at 10 per cent of total production), it should be excluded from the aggregate measurement of support (actionable subsidies),” the official said.

The G-33 proposal, made in 2012, also talks about alternative solutions which includes calculating procurement subsidies by changing the base year from 1986-88 and making it more recent, or by indexing it to inflation.

“We are flexible in our approach. We don’t intend to just stick to one proposal, but are ready to discuss the alternatives suggested in G-33’s earlier proposal,” the official said.

India runs the risk of breaching the agriculture subsidy cap, at least in rice, in a few years’ time once it fully implements its food security legislation.

In Bali, it agreed to give its approval to an agreement on trade facilitation that places obligations on all members to upgrade their customs infrastructure only on the condition that the rules on food procurement subsidies are changed.

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