Govt works to finetune farm subsidy as per WTO

India has until now been claiming green box protection for its support towards public stockholding for food security purposes.

The government is working on a “paradigm shift” in the country’s agricultural subsidy regime — now mainly centered on minimum support prices (MSP) and provision of fertiliser, water and other inputs at below cost — to make them WTO-compatible without any reduction in the overall quantum of assistance to farmers.

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“The intention is not to reduce domestic support. Instead, it is only to shift the present form of subsidisation based on price support to that of public investment for irrigation systems, R&D for environment-friendly cultivation practices and increasing farm productivity. We need to make greater use of untapped categories of green box subsidies such as structural adjustment assistance, income insurance programmes and support to disadvantaged regions,” Commerce Ministry officials said.

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The latest exercise follows a directive from the Prime Minister’s Office in mid-November seeking quantification of all subsidies and support measures extended to India’s farm sector under the WTO’s Agreement on Agriculture. Subsidies coming under the green box are not subject to any reduction commitments, as these are considered to be non-trade-distorting.

“We are examining the possibility of moving as much subsidies as possible under the green box, which is a safe haven. Only in the case of MSP-based procurement, which is a price-support measure, is such a shift not possible”, the officials noted.

India has until now been claiming green box protection for its support towards public stockholding for food security purposes. The opponents to its stance have contended that food security-linked stockholding programmes are trade-distorting, if they entail procuring grain from farmers at above market prices.

India successfully negotiated an open-ended “peace clause” at the WTO’s General Council last November. Under this, no country can be dragged to the WTO’s dispute settlement body for any alleged breach of farm subsidy limits on account of food security-linked stockholding, pending the finding of a “permanent solution” to the issue.

But in the meantime, the government on its own has sought to limit MSP increases and cracked down on states announcing bonuses over and above these.

At a recent meeting of top officials from the Commerce, Food, Agriculture and Finance ministries, the idea of an appropriate model of direct “decoupled” farm income support — that is, not linked to prices or production — in the Indian context was also discussed. This will require identifying the beneficiaries to whom such support would be directed, based on the creation of a comprehensive database of tillers/owners, digitization of land records and fixing the per hectare support to be paid annually to them.

There is a similar plan of overhauling the entire input subsidy delivery mechanism through direct benefit transfers (DBT) in fertilizers, electricity and water. The DBT model is already being implemented in delivery of subsidized LPG cylinders. It is also being proposed to begin this on an experimental basis for distribution of foodgrains, which could also be extended to other urban areas.

Source:: Indian Express