A recent report in this newspaper refers to the US once again alleging that India’s foodgrain procurement policy is violative of WTO rules — even as the EU appears ready to work towards arriving at a solution. India’s procurement programme has been a subject of contention for over a decade. The US has argued that the subsidies given on account of procurement and distribution of grain distort global grain markets; the levels, in its view, now exceed the permissible limits defined by a WTO formula (10 per cent of the value of the output of crop concerned).

India, in turn, rightly defends its inalienable right to use its subsidies for food security concerns. It is right when it questions the manner in which this subsidy is calculated. It also contends that these subsidies do not distort global markets. India along with other developing countries had brokered a ‘peace clause’ at the WTO Ministerial held in Bali in December 2013. The deal, broadly speaking, was that while the WTO members work towards a an acceptable level of subsidy (which includes a better way of computing it), the member countries should abide by disclosure requirements. In reality, there has been no ‘peace’ since 2013, with the US engaging in periodic spars. It has little ground to do so, as its own farm subsidies for wheat and corn are trade distorting. India’s public distribution system certainly has its flaws, but it is the country’s sovereign right to devise its own solutions with respect to feeding its people. In the run-up to the next WTO Ministerial to be held in February, the pressures on India to modify or even dismantle its PDS are likely to mount — even as the evidence that it is distorting the global grain trade in rice in particular is at best flimsy.

However, India needs to be wary on a few counts. The country accounts for 40 per cent of the global rice trade. Its non-basmati rice exports (which have been banned since this July to deal with domestic inflation) at 16-17 million tonnes are generally four times the exports of the premium basmati variety. This gap was a little over 2X in FY15. India’s wheat exports have climbed sharply since FY21, although it remains a marginal player. The crucial issue here is that non-basmati rice and wheat are procured under PDS. This has invited global attention. India has been accused of diverting PDS stocks, released at lower than global rates, for deriving export advantage. It is another matter that the exports cannot be traced back to government warehouses. Besides, it has not helped India’s cause that it has chosen to speak openly about its farm export ambitions; this does not sit well with food security goals.

India should defend its ground at WTO by arguing against a subsidy formula that is benchmarked to 1986-88 global prices (which makes its MSP seem large and ‘trade distorting’). But it should also rethink its export promotion methods, if that leads to undue interest in its food policies.

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