Buenos Aires: In the absence of a deal at the World Trade Organization (WTO) meeting in Buenos Aires to allow developing countries a free hand to procure staples for their subsidized food programmes, India will fast-track its food subsidy notification obligations at the multilateral body to use an interim reprieve agreed in 2013 to ensure it does not violate WTO rules.

While a permanent solution would have given more legal certainty and flexibility to India to run its food security programmes, India’s current public distribution system will not be immediately impacted by the indecision as a revised peace clause stuck in 2014 runs in perpetuity. However, if India seeks to use the peace clause or indefinite reprieve on government procurement, then it has to give information to WTO about the size of its food subsidy bill till last year. India has only notified its food subsidy bill till 2013-14.

“If the rupee revalues very strongly or the minimum support price rises sharply or government procurement becomes huge, then only we will have to use the peace clause. I don’t see that happening immediately. I don’t need to use the peace clause at least for another year. Before that, we will complete our transparency obligations," an Indian trade diplomat said speaking under condition of anonymity.

Present WTO rules cap government procurement for subsidized food programmes by developing countries at 10% of the total value of agricultural production based on 1986-88 prices. After developing countries led by India complained that the base year is now outdated and they need to be given leeway to stock enough food grains to ensure food security for millions of their poor, WTO at its Bali ministerial conference in December 2013 gave a four-year reprieve to developing countries till December 2017 during which period if they violate the 10% cap, developed countries will not take legal action against such developing countries. This interim solution came to be known as peace clause.

However, the Narendra Modi government after coming to power in 2014 forced developed countries to clarify that the peace clause will continue indefinitely if a permanent solution on the matter cannot be found at the 11th ministerial conference (MC11) in December 2017. “We anticipated a situation when WTO could not deliver on its promise of a permanent solution by end 2017. That foresight in 2014 is coming in handy now," the trade diplomat said.

The indefinite peace clause comes with onerous notification obligations 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 what existed till 2013. India says it has covered all staple foods under its current public distribution system and does not need to add any new food item. However, the notification obligations may make it difficult to operationalize the peace clause as till now it has notified its agriculture subsidy levels to WTO till the financial year 2013-14.

In 2013-14, against the 10% food subsidy cap, India’s food subsidy had touched 5.56% in rice and zero percent in wheat. A sharp dip in the value of rupee in recent times has protected India from breaching the cap. However, a dip in domestic production of rice and wheat may also force India to use the peace clause earlier than anticipated.

Without naming the US, a commerce ministry statement on Tuesday said India is “surprised and deeply disappointed" that despite an overwhelming majority of members reiterating for a permanent solution, “a major member country has reneged on a commitment made two years ago to deliver a solution of critical importance for addressing hunger in some of the poorest countries of the world."

Member countries continue to engage on Wednesday for a ministerial declaration on the last day of MC11 which may see work programmes on issues such as elimination of fisheries subsidies. However, India has made sure that on e-commerce, discussions will continue in various committees of WTO, blocking a proposal by developed countries and China for a working group for unified discussions on the subject.

Asit Ranjan Mishra is in Buenos Aires at the invite of India’s commerce ministry to cover MC11

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