The ideological position of civil rights groups has also been that as the end of the Uruguay round, US and European countries agreed to freeze their substantially large farm supports at the prevailing levels but countries like India which didn't have subsidies then have been prevented by the agreement from supporting farmers by the 10 percent limit. Another sour point is that support prices to farmers are being compared with the yardstick based on global grain prices in 1986-1988, which is patently inadequate today.
India appears to have prevailed at Bali meet this time and will not be pulled up for violating the 10 percent limit till a permanent solution is evolved in the form of updating the global benchmark grain prices.
In an interview with CNBC-TV18, Prof Ashok Gualti Chairman of the Agricultural Prices Commission and Prof Himanshu Roy of the JNU shared their views on how India should tackle the international community and what it must clean up at its own end.
According to them, four key points should be taken a note of; first, India needs to negotiate with the WTO to change the base prices for measuring how much the minimum support price (MSP) subsidises farmers. The MSP cannot be compared to the 1986-1988 global prices of food grains. The WTO needs to urgently change the base price to maybe a three-year current rolling price.
Secondly, India in consort to other developing countries may have to renegotiate the limits on how much it spends on subsidies to farmers considering that the USD 30 billion that India spends seems measly compared to the USD 400 billion spent by developed countries, which have smaller populations, but this could be a lot tough.
Thirdly, in any case India simply cannot export from the food stock piles procured apparently to support farmers and that too export at below international prices. Fourthly, India should ensure it does not procure recklessly not just for WTO compliance, but in its own interest India needs to ensure that it procures to a plan and offloads the stocks systematically.
Also Read: Food Bill will push govt spending to 1.3% of GD, says Moody's
Below is the verbatim transcript of the interview.
Q: Are we right in understanding that India violates the WTO rules in the amount of food stocks it is holding and we are not able to given to the WTO because we will have to hold even more stocks when the Food Security Bill kicks in in full swing?
Gulati: The issue of giving subsidy to the consumer is not a problem at all. If you want to give to the consumer, you give as much as your pocket can afford. So calling it food subsidiary for the consumer creating a problem, no. The problem comes on the production side because the agreement on agriculture on which India has signed says that you have the limit to subsidise your agriculture to the tune of 10 percent of the value of agriculture. So that is the clause on which we have signed.
The idea was that different countries at different points of time had been subsidizing the developed companies. OECD countries had to reduce their support to agriculture because they were at a much higher level. We were at that time having negative support to agriculture that means we were implicitly taxing our agriculture. So, we thought 10 percent is a reasonable buffer at that time. The comparison is in relation to the fixed external reference price of 1986 to 1988.
When we want to say that we want to hold as much stock and we want to buy at a price whatever we want to give to farmer and then hold those stocks, the first question comes what is happening to your aggregate measure of support for agriculture. Are you crossing the de minimus level of 10 percent on which you have signed.
Q: If you can give me those numbers, when you say 10 percent of aggregate output what is the amount of money India annually spends on minimum support price (MSP) and in procurement and what is the total aggregate output, can we get some idea of those two numbers?
Gulati: Let me give you the technicality of how it is calculated because the number will come out of that. The external reference price of 1986-1988 was fixed. So your today's price that you are giving to the farmer has to be compared with that. In the original submission that India made, that was the external reference price, the base price was given in rupees, which was about Rs 3,050 per tonne. Today you are giving to your farmer Rs 14,000 or so for wheat per tonne. This is four-five times more than what your base price was.
If you look at that then you crossed this limit long time back. The issue is that there is an article 18.4, which says that the excessive rates of inflation in the developing countries will be given due consideration. It is that article that needs proper interpretation what is excessive rates of inflation. Now they say alright, you give us, submit us and we will discuss this in committee on agriculture. Those are the fundamental issues. That is one part of the story. This is a product specific part.
Q: Even over here, if you had taken a dollar value of Rs 3,050 as of 1986, it would have been less than 15 to a dollar and at Rs 14,000 we are probably not even in breach, is that calculation?
Gulati: Wheat we have not breached while we have breached in case of rice. So if you take the case of rice, we have already breached long time back. The question is that that is the product specific part. There is another part of support which is a non-product specific, which is input subsidies. Our input subsidies had been blowing like anything. If you look at that, in that also we went ahead, but then there is another article 6.2, which says that the support that you are giving to low income or resource poor farmers that can be exempt from that.
How do you define this low income or resource poor farmers. India said anyone below 10 hectares of land; they are all low income and resource poor. That is an issue that needs proper interpretation and agreement by all the members of the WTO. These are the fundamental issues on which we should be negotiating. The issue of public stock holding - even they say okay, if you want to keep this huge 80 million tonnes or whatever you want to keep, you keep it, do whatever you want to do in your domestic market but don't export it because that export will not be at a market price. That is where the world is concerned, the rest of the world that you will be distorting the global markets. If for example today ministry is inviting tenders to export wheat at USD 260 or USD 280 or USD 290, these are administrative decisions. This is what the rest of the world would not like to see. They will say let the markets operate rather than this huge administrative decision.
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