India’s ‘wheat waiver’ WTO demand is risk-fraught

Source: This post is based on the article “India’s ‘wheat waiver’ WTO demand is risk-fraught” published in The Hindu on 1st August 2022.

Syllabus: GS 3 Effects of liberalization on the economy 

Relevance: About the public stockholding (PSH) of food.

News: Recently, India demanded World Trade Organization (WTO) to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).

About India’s PSH Policy and WTO rules

India’s PSH policy is based on procuring food from farmers at an administered price (minimum support price or MSP – generally higher than the market price).

The PSH policy serves the twin objectives 1) Offering remunerative prices to farmers and 2) Providing subsidised food to the underprivileged.

However, under WTO law, such price support-based procurement from farmers is considered as a trade-distorting subsidy. Currently, India has temporary relief due to a ‘peace clause’ that bars countries from raising legal challenges against these subsidies.

India’s concern is that WTO should have the policy space to hold public food stocks using the MSP. However, there is no mention of price support in the Geneva declaration.

Can the country export public stock holding food grains?

WTO prohibits countries from exporting foodgrain procured at subsidised prices. This is because, a) Gives an unfair advantage in global agricultural trade, b) A country will sell foodgrain in the international market at a very low price. This will depress the global prices and have an adverse impact on the agricultural trade of other countries.

Accordingly, in paragraph 4 of the 2013 WTO decision on PSH for food security purposes, countries procuring food for food-security purposes shall ensure that such procured food does not “distort trade or adversely affect the food security of other Members”.

This is also reflected in paragraph 10 of the Geneva ministerial food security declaration. The declaration states that countries may release surplus food stocks into the international market in accordance with WTO law. The WTO may agree to a temporary waiver to allow the export of wheat from public stockholdings given the ongoing food crisis in some countries.

Status of PSH on recent WTO ministerial meeting

India’s demand for a permanent solution to the PSH policy has acquired a new dimension in the recent WTO meeting. . The Russia-Ukraine war has unleashed a food crisis in many countries.

India insists that it should also be allowed to export food, especially wheat, from the pool of foodgrain procured under the MSP.

What should India do to protect India’s PSH policy?

1) India should revisit its stand on asking for a waiver for wheat exports from its public stockholding. To help the food crisis in other countries, India can strengthen its commitment to the United Nations World Food Programme.

2) India should focus on its core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security, 3) India can lift the ban imposed on private traders to export wheat.