Important victory

The concessions that India secured from the World Trade Organisation (WTO) on agricultural subsidies and stockholding of food grain were hard won. The strong position adopted by the Indian delegation at the Bali ministerial amounted to a take-it-or-nothing-in-return stance in the negotiations. This was natural because the efficient and long-term working of the UPA government’s food security scheme would have been impacted if there was no agreement. India succeeded in getting its view across and won its case, though not as completely as it would have liked. It even risked a rift inside the Group of 33 countries on some of the negotiating points. While China and  Brazil had a different view, most African countries were supportive of the Indian position. The decision in any case underscored the importance of food security in all developing countries.

The exemption for developing countries from the 10 per cent ceiling on subsidies in food procurement, stockholding and distribution is not a permanent waiver. The interim relief will continue till a final agreement is reached and India, along with other developing countries, will have to clinch it before the next ministerial. However,   India cannot be taken to the WTO’s dispute settlement board for penalties till a permanent solution is hammered out. That amounts to an indefinite waiver. The interim period should be used to amend the WTO’s agreement on agriculture which considers food grain prices as in 1988 as the basis for computing subsidies, without inadequate provision for inflation.

India has made it clear to the plenum that it will not accept outdated rules. It will now also have to ensure that food grain from its public stocks will not be used to distort the global food trade. In effect this may mean some restrictions on exports. But India may not be able to go in for exports in price sensitive quantities once the food security scheme gets implemented. So this restriction may not actually hurt.

While the subsidies will continue, India has stuck to its right to offer the farmers the minimum support prices (MSP)  it pays them for their crops. The MSP system has often been politically used and sometimes distorted crop patterns. The procurement system has also resulted in overstocking of food grain. An internal review of these practices can lead to a better and more useful subsidy regime within the country. The Bali decisions have accepted India’s concerns but they can be used to improve our own policies.