· WTO Rules Restrict India’s Ability to Build its Food Stock as the Procurement of Food Grains at MSP is subject to Strict Limits

With almost all economic activities likely to remain at a low key in the coming months, the Covid-19 pandemic could have a devastating impact on the livelihood and food security of millions of people across India. It is generally recognised that food stocks of 58 million tonnes with the FCI will be an important factor in helping the government avoid a potential crisis. However, what is not adequately appreciated by many, is that the food stocks exist partly on account of deft negotiations by India on the issue of food security at the WTO during 2013-14. In these difficult times, when many countries are likely to confront food shortages, this aspect merits discussion.

India implements a price-support-backed public stockholding programme to safeguard the interests of both its consumers and farmers. Under this policy, the government procures food grains from farmers at minimum support price (MSP), and thereafter distributes it at subsidised prices to the vulnerable sections of society through the public distribution system (PDS) and other welfare schemes. Thus, procurement at MSP, stockholding and distribution to eligible households form the three integral components of India’s food security framework.

However, WTO rules restrict India’s ability to build its food stock as the procurement of food grains at MSP is subject to strict limits. Under these limits, the amount of support on account of procurement of food grains at MSP cannot exceed 10 per cent of the value of production of the procured product. Almost two decades ago, India’s trade negotiators had anticipated that the policy space to implement MSP could be severely curtailed on account of this obligation. Retaining the elbow room to implement the MSP, thus, became an important negotiating objective at the WTO.

After protracted negotiations lasting more than a decade, WTO members adopted a decision at the Bali Ministerial Conference in 2013 on public stockholding for food security purposes. In the nature of an interim solution, this decision allows developing members to invoke the peace clause, which protects their public stockholding programmes for food security purposes from legal challenge, even if they lead to a breach of commitments. As there was some ambiguity about the duration of the Bali Decision, a complementary decision taken by the WTO members in 2014 permits the peace clause to be available until a permanent solution to the issue of food security is negotiated. Thus, the peace clause could theoretically continue in perpetuity. The gains from this hard-fought battle are evident now.

In its most recent domestic support notification dated March 31, 2020, India has taken recourse to the peace clause, as the product-specific support to rice was 11.46 per cent in 2018-19. This provides an assurance to the government that the MSP scheme for rice, ensuring food security for millions, can be continued without any legal challenge at the WTO. If the country had not pushed for the peace clause, then the possibility of building food stocks to address emergencies, such as what we are grappling with today, would have been substantially diminished.

The peace clause, although a positive step towards ensuring food security, contains onerous transparency and safeguard conditions and is limited in its scope and coverage. For instance, only traditional staple crops are covered by it, that too under programmes that were in existence in 2013. From the developing countries’ perspective, the permanent solution should address these shortcomings of the peace clause, and at the same time be consistent with their socio-economic realities.

The role of a price-support-backed food security policy cannot be underestimated in the fight against hunger, especially in the current pandemic where millions are facing livelihood and food insecurity issues. It would have been extremely difficult to ensure food security for 800 million of the Indian population by importing food grains in this global crisis, more so when countries are imposing export restrictions to keep essential food commodities within their borders. Additionally, we need to remember that it was this policy that helped India escape the inflationary impact of the 2008 food crisis ― a time when many countries were plagued by food riots.

In conclusion, in the fight against hunger, the global community needs to appreciate country-specific food security policies, rather than constrain them with unviable limits under WTO rules. Besides India, many countries including Indonesia, Kenya, Zambia, Egypt, Malawi and Pakistan implement similar policies to ensure food security. No doubt, the peace clause becomes important and relevant for these countries. However, Covid-19 is a stark reminder that the already battered WTO may further lose its relevance in the coming years, if it fails to conclude the negotiations for a permanent solution to the problem of food security in developing countries.