India still faces charges levelled by several countries, including Canada, Australia, Japan and the European Union, of understating its food and agricultural subsidies. Such accusations and disputes can end only when the norms stipulated in the AoA for calculating these subsidies are rationalised and the ceiling on such expenses are revisited. The catch is that the subsidies are calculated on the basis of domestic 1986-88 prices, which were just a fraction of what they are today. India wants either that decades-old benchmark to be revised, or for the currently applicable ceiling on the total cost of subsidies and stockpiling – 10 per cent of the total production – to be permanently relaxed. Of course, the fact that India’s 1986-88 prices for wheat and rice are much lower than prices today is not unrelated to the continual increase in minimum support prices, or MSPs — precisely the behaviour that is arguably in violation of the WTO norms. Other countries are concerned that these subsidies incentivise the over-production of agricultural produce that could then be dumped on the world market and distort global prices.
A permanent solution to this dispute on stock piling and subsidies will continue to be worked towards. In the meantime, an assurance is to be obtained at the forthcoming special general council meeting of the WTO that countries will refrain indefinitely from challenging India’s violation of the 10 per cent limit. There is little doubt that the deal with the United States prior to the WTO meeting is a major breakthrough. However, the tasks before the Modi government are onerous and the opportunity even bigger. The government should use the excuse of a foreign treaty to work on rationalising and revamping its own food management regime to hive off needless costs. Some important steps have been taken in recent months to cut down food procurement and prune food inventories. But more flab must be shed to match food acquisition and stock holding with genuine needs.