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The government is probably proud commerce minister Anand Sharma is standing up for India’s rights to accumulate food stocks—“For India, food security is non-negotiable, need of public stock-holding of foodgrains to ensure food security must be respected. Dated WTO rules need to be corrected”, he said at the Bali plenary. While that sounds very good, India needs to keep in mind not just the fact that it needs the WTO process more than the US or the EU—so India needs to be more flexible—but also the fact that it is being unnecessarily dogmatic in a variety of ways. For one, India just doesn’t need the kind of stocks it has—it had 74 million tonnes of foodstock with FCI in July against the norm of 32 million tonnes. Confronted with mountains of foodgrains, a large proportion of which rots as there just isn’t enough covered storage, the government usually has no option but to liquidate the stocks by offering discounts every year—so far this year, the government liquidated 5 lakh tonnes of wheat by lowering the price by $40 per tonne and another 15 lakh has to be liquidated in the next 4 months—to those who wish to export it. This is precisely what EU Trade Commissioner Karl de Gucht said at Bali was distorting trade—while India has said it will not release the grain in the export market, the fact is that the current practice does distort the market.
Even under the Food Security Act which requires more stock with FCI, the CACP estimates India needs just 47 million tonnes of grain on July 1 if 2 months of stocks are to be maintained—if cash transfers are to be made in 33 big cities where the bank network can easily be used to do this, CACP estimates, the requirement of stocks can be reduced to 20-25 million tonnes. At current prices, this 50 million tonnes of extra wheat and rice means an additional capital cost of $17.5 billion, financing which cannot be loose change, especially for a fiscally stressed exchequer. Direct cash transfers become even more appealing since, given a 40% leakage level in the PDS, anything that reduces the size of the PDS, results in lower leakages.
Given that the WTO proposal which effectively reduces the government’s role in procurement—this also benefits India’s private trade which will get greater room to operate—is good for India, what’s not clear is why