India under Attack for selling 7mn tonnes cheap Rice from FCI Stock in World Market

India’s notification to the World Trade Organization (WTO) on breaching the prescribed subsidy limit for its public stockholding programme for rice has raised questions as some countries have sought an explanation over a difference of seven million tonnes between the available and actual stocks in 2020-21.

The government has told the agency that the gap of around $2. 6 billion (about Rs 20,000 crore) was on account of damages due to multiple factors, including pollution and moisture. It has also dismissed suggestions that rice procured by government agencies for public distribution has been diverted or routed for exports.

But the noise in Geneva, where WTO is located, has prompted the government to take a hard look at the numbers with an exercise already initiated by the commerce department in consultation with the food ministry and the Food Corporation of India (FCI), which is responsible for maintaining public stocks of grains for meeting the requirements under the vast public distribution scheme.

A senior official said that there could be multiple reasons for the losses, which include a large stock of unmilled rice that may be with FCI and state agencies, something that has been flagged in the notification shared with WTO. Even some trade experts in India concurred with the view. The procurement agencies purchase paddy, which is then milled and transferred to the warehouses of FCI and Central Warehousing Corporation before being given to states for distribution. Around two-thirds of the paddy that is procured is milled into rice, government officials explained, arguing that this could be a major reason for the gap.

“The equation may not always match, but the government takes two-thirds realisation as the formula. I do not see it as a major concern as there is no reason for India to hide the numbers. The developed countries are unnecessarily raising an issue since they do not want the waiver for public stockholding to continue,” a trade expert said.

India, along with a group of countries, is seeking a re-view of the cap on public stockholding of grains for several years, arguing it is necessary for food security. In 2013, in Bali, it had managed to extract a concession that no developing country would face any dispute in case the prescribed limit is exceeded. It is the only country to notify that the limit for rice has been breached.

During a meeting late last month, the US had flagged concerns about India not including full information in its notifications. Countries such as Uruguay, the US, Paraguay, Thailand, Australia, Japan, and Canada have requested consultations with India on the Bali decision on public stockholding programme for food security purposes.

India’s public stockholding programme for food security purposes involves minimum support price (MSP) for wheat, paddy, coarse grains and pulses and maintaining adequate stocks. It includes distribution of grains to the poor.