As the Food Security Bill awaits Parliament clearance, India fears that implementation of obligations under the Bill may lead to breach of farm subsidy limits fixed by the World Trade Organisation (WTO) and attract penalties if some global rules are not amended.

New Delhi is, therefore, scouting for support at the WTO in seeking an amendment to the Agreement on Agriculture (AOA) to remove limits on public stockholding and food aid, along with developing countries such as China, Pakistan and Indonesia.

Interestingly, while the US continues to oppose any amendment to the rules, the proposal put forward by India and other members of the G-33 group of developing countries recently found some support from developed countries, including the EU, Norway and Australia.

“All that we are seeking is recourse to an inevitable situation that will allow the state to perform its sovereign function of providing welfare. We have got a positive response to our proposal for food security at the recent meeting of senior officials at the WTO. Members, including the EU, Norway and Australia seem prepared to support our proposal if we agree to make some changes,” Rajeev Kher, Additional Secretary, Commerce Department, said.

India is hopeful that the changes in the AOA will be agreed to at the WTO Ministerial meet in Bali, Indonesia, in December as part of the small package that members are trying to carve out of the broader agenda of the deadlocked Doha Round.

Leeway in subsidies

The AOA allows so-called ‘market distorting subsidies’ up to a limit of 10 per cent of total production. While actionable subsidies given by India were negligible when the global trade rules were firmed up during the Uruguay Round in the late eighties and early nineties, with the rise in food prices and the number of poor to be supported, these have gone up substantially.

The international reference price, used to calculate the subsidy involved in the Minimum Support Price operations, is pegged to 1986 global prices, which are much lower than those prevailing now, leading to overstatement of subsidy.

“If we implement the Food Bill, there are chances that we will breach the subsidy limit for rice next year itself while wheat will follow soon after,” another official dealing with multilateral trade issues told Business Line .

While India is estimated to be procuring about 35-40 million tonne foodgrains annually, the offtake may rise to 70 million once the Bill is passed, entitling 67 per cent of the population to 5 kg of subsidised foodgrain per person, per month.