Is Indian Agriculture Following Two Policies – One at WTO and Another at Home?

Recent statements in the media put the Modi government’s position at the World Trade Organisation on Minimum Support Price (MSP) and the public storage of food grains on shaky ground.

The primary trigger for the confusion was the June 7 cabinet meeting which announced an MSP hikes in the range of 6-10% for a variety of crops. This step quickly drew the ire of Niti Aayog and the commerce ministry. So the real question is, what is happening to agrarian policy, globally and domestically?

Although the agriculture ministry supported the move go grant farmers inflation-adjusted remunerations, Niti Aayog anticipated inflationary pressures on the economy: “The increase suggested in MSP varies from 5.3% in the case of urad to more than 10% in crops like cotton (long staple), sesame and moong. If this much increase is given to MSP, it will be very difficult to keep food inflation in the stipulated range of 4-6%, which is very important for macro-economic stability.”

Also don’t forget that as CEO Niti Aayog, Amitabh Kant had advocated for abolishing MSP. Strike one MSP.

Even more shocking was the commerce ministry’s response:

“As per WTO’s Agreement on Agriculture (AoA) related to public stockholding for food security purposes, the Market Price support (MPS) provided through procurement of crops by the government at administered price (MSP in India) is required to be notified to the WTO. Further, it needs to be ensured that product-specific support is within the de minimis limit, that is, 10% of the value of the production of the respective crop. Similar de minimis limit also applies to non-product specific price support across the agriculture sector.”

India has also been challenged by the developed countries for giving subsidies over 10%, exceeding the de minimis limit.

They also did say reportedly that MSP production should not be open-ended and predetermined targets should be specified simultaneously for procurement of MSP crops. To understand their state we need to go back to the WTO.

Here, too, there is a deep confusion about which way is India headed, because ever since the WTO was born out of General Agreement on Tariffs and Trade (GATT), India has been a major voice advocating for global south-centric policies of agriculture and farmers’ welfare. Our positions on price support, the public food distribution systems and subsidies for farmers have often been challenged by the US and other developed countries as being too protectionist and barring free trade. But we did manage to survive until the WTO’s 12th ministerial conference (MC12) concluded last year.

First, India reportedly withheld support from Food Security and the World Food Programme discussion, which was pressing for government-to-government food grain purchases to be approved from PSH (public stockholding programmes for food security purposes like the public distribution system programme) and then under pressure from the US, Brazil, Uruguay, Australia, and Thailand scuttled and agreed to the WFP proposition.

This basically allows for WFP to procure food grains from countries like India, despite India putting up trade or export restrictions. Whoever controls the WFP now has the power to circumvent any government policies and get grain out.

The second strike came when India led a resolute endeavour to establish a lasting resolution for public stockholding programs aimed at ensuring food security at the WTO. Over 80 nations united in support of this cause, with India at the forefront of the campaign. However, formidable opposition from the US, EU, Australia, and various South American nations created significant obstacles. Regrettably, despite tenacious efforts, the discussions surrounding this critical issue were ultimately dismantled, leaving no indication of their outcome. Remarkably, this marks an unprecedented occurrence in the annals of WTO negotiations, as the realm of agriculture is now devoid of any decision or declaration.

Now, what does all this mean? Simply put, the government is saying one thing at the WTO and another thing to its farmers as the election year approaches, and is increasing MSP following only electoral logic.

The agriculture ministry is right ― inflation hasn’t been adjusted since 1986 and a sudden spike in fuel and fertiliser costs, plus wheat price volatility, have pushed inflation far beyond the average. The devaluation of the rupee and the rising dollar has also added to India’s problems. It is about time that India takes up the WTO challenge and once again steps forward as a leader of the global south in agricultural negotiations, and also negotiates a policy that ensures food security and protects the interests of farmers at home.

Source: The Wire