Insights into Editorial: Safeguarding the interests of farmers
Background:
Transformational changes are taking place in India currently, improving the way we live. These changes are impacting all our lives in small or significant ways. It is gratifying to know that the citizens at large are happy with these changes. The technology and policy are working together to remove discretion and opaqueness.
The on-going discourse on the Public Distribution System (PDS), the procurement of grains/pulses from farmers, public storage in Food Corporation of India godowns, commitments made in the World Trade Organisation (WTO), Direct Benefit Transfer, etc. is interesting. It is also necessary to infuse facts into the discourse.
What is the effect on the State exchequer on account of subsidy given under NFSA?
- Since the central issue price under the NFSA is much lower compared to the erstwhile Targeted Public Distribution System (for instance, in case of Tamil Nadu state) the burden on the State government has come down.
- On implementing the NFSA, the savings for the State exchequer on account of this subsidy, thanks to the lower central issue price.
NFSA
The National Food Security Act, 2013 (also Right to Food Act) is an Act of the Parliament of India which aims to provide subsidized food grains to approximately two thirds of India’s 1.2 billion people.
- The National Food Security Act, 2013 (NFSA 2013) converts into legal entitlements for existing food security programmes of the Government of India.
- It includes the Midday Meal Scheme, Integrated Child Development Servicesscheme and the Public Distribution System.
- Further, the NFSA 2013 recognizes maternity entitlements.
- The Midday Meal Scheme and the Integrated Child Development Services Scheme are universal in nature whereas the PDS will reach about two-thirds of the population (75% in rural areas and 50% in urban areas).
- Under the provisions of the bill, beneficiaries of the Public Distribution Systemare entitled to 5 kilograms per person per month of cereals at the following prices:
- Riceat ₹3 per kg
- Wheatat ₹2 per kg
- Coarse grains (millet) at ₹1 per kg.
- Pregnant women, lactating mothers, and certain categories of children are eligible for daily free cereals.
MSP vs Central issue price
Minimum Support Price (MSP) is the price at which central government procures the food grains from farmers. Central Issue Price (CIP) is the price at which government makes these food grains available to states. The states fix retail price to be charged at fair price shops.
- Procurement, storage, transportation of food grains. Procurement is done at Minimum Support Prices.
- Bulk allocation of food grains to the State Governments, which in turn deliver the same to recipients. This is done at Central Issue Price (CIP)
How can Trade Facilitation Agreement be seen about facilitating and bringing trade transparency?
The Trade Facilitation Agreement was agreed on in 2013 in Bali and came into force from February 2017 after two-thirds of the WTO’s 164 members ratified it.
- Several trade-related issues such as transparency, predictability and efficiency at the ports, faster clearance procedures, and improved appeal rights for traders are to be addressed by countries.
- They shall notify various provisions to bring in the facilitation, over three years or more.
- Only the basic set of provisions will be implemented within one year.
- The Trade Facilitation Agreement allows for consultations before any new trade rules are notified.
- A WTO study indicated that when the Trade Facilitation Agreement is fully implemented, trade costs for member countries will decrease by an average of 14.3%.
- It is also estimated that the time taken to export and import will come down drastically.
- Budgetary allocations are made for bringing in single-window clearance and improving customs clearance at the ports.
- A high-level committee chaired by the Cabinet Secretary will monitor logistics and efficiency at ports and related issues.
Thus, it can be seen that the Trade Facilitation Agreement is not about market access but inter alia about facilitating and bringing trade transparency.
What is the unresolved Public Stock Holding issue at the WTO?
The Public Stock Holding issue remains unresolved at the WTO.
- Although agreed on in Bali in 2013 and reiterated in Nairobi in 2015, that a permanent solution for Public Stock Holding be found by 2017, it is still a ‘work-in-progress’.
- The existing WTO rules would have allowed a legal challenge to our Public Stock Holding and minimum support price-based procurement programme in case we breached ‘the limit’ on procurement.
- ‘The limit’ is defined as 10% of the value of production of the particular grain being procured.
- WTO rules classify procurement and holding of public stocks for food security purposes as ‘Green Box’ or non-trade distorting.
What is considered as trade-distorting under WTO rules and how Peace clause will give immunity?
- If food grains for the public stocks are procured through an administered price/minimum support price and if this minimum support price is higher than the archaic fixed reference price (calculated on base period 1986-88), then it is considered as trade-distorting agriculture support.
- Such trade-distorting support should be within ‘the limit’, which is 10% of the value of production of the particular grain being procured. This is also called as Peace clause.
- One of the first things that this government did in 2014 was to intensely engage with the WTO to obtain a ‘peace clause’ so that even if we did breach ‘the limit’, no one shall challenge our programme till such a time a permanent solution is found, agreed on, and adopted by the WTO membership.
By November 2014 we obtained an open-ended peace clause from the General Council of the WTO, which was later reaffirmed at the Nairobi Ministerial and safeguarded the interests of the farmer and ensured that India’s sovereign right to protect them is not diluted.
Conclusion:
Providing food to the poor or targeted groups at subsidised prices is fully WTO-compatible. This does not figure at all in the WTO calculations. We have not undertaken any commitment in the WTO for any kind of limit on the food supplied under the NFSA.
An informed discourse based on facts is welcome and such a discourse shall strengthen public policy.
