India updates WTO on food subsidies for 2nd time in 3 months
While India insists its public procurement of rice which increased to $2.5 billion in 2016-17 from $2 billion a year ago is well within its WTO commitments, countries like the US claim India may have already breached its permissible limit of food subsidies
New Delhi: India has updated data on its food subsidies to the World Trade Organization (WTO) for the second time in three months, submitting details for the financial year 2016-17.
While India insists its public procurement of rice which increased to $2.5 billion in 2016-17 from $2 billion a year ago is well within its WTO commitments, countries like the US claim India may have already breached its permissible limit of food subsidies.
WTO rules cap government procurement for subsidized food programmes by developing countries at 10% of the total value of agricultural production based on 1986-89 prices. These figures are always reported in dollar terms.
In the absence of a deal at the WTO ministerial meeting held in Buenos Aires in December to allow developing countries a free hand to procure staples for their subsidized food programmes, India seems to have fast-tracked its food subsidy notification obligations at the multilateral body to use an interim reprieve agreed in 2013 as and when required to ensure it does not violate WTO rules.
“We are still within 6% for rice. It will take another two to three years for us to reach 10%. But a lot will also depend on the value of the rupee,” a government official said under condition of anonymity.
Biswajit Dhar, professor at Jawaharlal Nehru University said India still has enough headroom and it should not worry about breaching the 10% limit any time soon. “We are under pressure to keep our food subsidy notifications updated because there was a legacy issue we didn’t notify for a long period of time,” he added.
However, the US has raised doubts about India’s calculations, arguing it may have already breached the 10% limit.
In a 12-page counter notification circulated on 9 May, the US alleged that India’s minimum support price (MSP) programmes for wheat and rice breached New Delhi’s permissible levels of trade- distorting domestic support at the WTO.
“India appears to be providing significant market price support, both in terms of absolute value and as a percentage of the value of production, for wheat and rice. India’s apparent MSP for rice appears to have been over 70% of the value of production in each of the past four years,” the US said in its submission.
India has secured an indefinite peace clause at the WTO under which its existing food subsidy programmes will not be challenged if they breach the 10% limit. However, the peace clause comes with onerous obligation under which countries need to notify their food subsidy levels to WTO till the previous year. Such countries are also not allowed to start any new subsidized food programme after those that existed till 2013.
India announces MSP for as many as 23 crops but the subsidy is largely restricted to paddy and wheat, where the amount of government procurement is huge. India says it has covered all staple foods under its current public distribution system and does not need to add any new food item.