Questions efficiency of country’s food subsidy programmes

Targeting India’s Food Security Programme, the US has questioned its efficiency and has said that the country should spell out measures to increase the programme’s effectiveness.

It has also demanded that India submit all relevant statistics and documents on the programme to the World Trade Organisation (WTO) in order to gain immunity against penalties in case subsidies breach specified limits.

“The matter will come up for detailed discussion at the meeting of the WTO’s Committee on Agriculture next week,” a Government official told Business Line.

India fought hard at the WTO’s Ministerial Meeting in Bali in December to keep procurement subsidies under India’s Food Security Programme out of the list of subsidies classified as ‘trade distorting’. In case ‘trade distorting’ subsidies breach 10 per cent of the production value, a country is subject to penalties.

Conditional reprieve

While a permanent solution to the problem was deferred in Bali, developed countries promised not to take any action if subsidies breached the given caps. However, the reprieve is subject to the condition that India submits all information and documentation that are sought by members on particular programmes involving subsidies.

Attacking India’s food subsidy programmes, the US said that the cost of India’s food subsidy bill is approximately twice the amount it would cost to provide all households living below poverty with enough cash to cross the poverty line.

“This highlights the large costs the Government incurs in procuring, storing, and distributing foodgrains that could otherwise be more effectively used to alleviate poverty in India,” a US submission to the WTO pointed out.

Pointing specifically at the National Food Security Act, 2013, the US said that India should point out if there is any specific language in the Act to address these concerns (related to efficiency). It also asked India to highlight the steps being taken to implement its current policies more efficiently.

“The US has started treading into India’s sovereign policy making space under the guise of need for increased transparency for subsidy programmes. The country has no business questioning the efficiency of India’s programmes,” a trade expert from a Delhi-based research organisation said.

Complicated process

India has also been asked to submit the documentation on the domestic subsidy involved in the Food Security Programme.

The process could be complicated as it would involve taking into account all the procurement done by the Government at various stages in every State, the prevailing market price at that time and the minimum support prices (MSP) paid to farmers.

(This article was published on March 17, 2014)
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