WTO summit/ National Food Securtiy Act: Win or Lose??

Recently, four days from 3^rd – 7^th December Ninth Ministerial Conference held at Bali, Indonesia headed by World Trade Organisation (WTO) Director-General Roberto Azevedo concluded on a positive note for the first time in existence of WTO. A deal to boost global trade has been approved by the World Trade Organisation’s 159 members for the first time in nearly two decades, and shut off all the arguments  raised on the very existence of WTO. Free Trade Agreement, Agreement on Agriculture (AOA) and few more were the problems tabled for the summit.

With Food security in pipeline AOA was the crucial one from India’s viewpoint. India leaded G33 (group of developing countries) had taken hold of its firm stance, and changed the momentum in its favour. Developed nations argued about the subsidies given by developing countries and least developed countries to their agriculture sector should not exceed 10% of their agriculture production and if exceeds, defaulting country must be penalized. But G33 headed by India were not in favour of this. So, few members of organisation proposed ‘peace clause’ as a solution. In Peace clause defaulting countries (country breaching the limit of 10% subsidy) will not be penalised for a tenure of four year and afterwards they are liable to pay penalty if breaches the limit but this peace clause was again not been favoured by G33. India had taken its tough stance as at home National Food Security Bill (NFSB) is in pipeline and desired to avail relief from being penalised till the members of WTO won’t come up with some permanent solution. All this has diverted the direction of winds in India’s favour.

With all things aligned in favour of ‘Food Security Act’ government can give away as much subsidy as it should, onus is on government, to make this bill a massive success. Government is going for this to help it’s under privileged people to make them prosper. But despite of this fact, few questions are giving trouble to my mind. Is this actually a win or a loss for India at Bali? Will this Food Security Bill really going to help Indian government or is it again a ‘vote bank’ tactics with Lok Sabha election at doorstep?

Under National Food Security Act, government is providing cover to almost 70 percent of India’s 1.25 billion populations. And to attain its goal, government requires around 65 million metric tonnes of food grains (wheat, rice etc) which shoots up the expenditure of government by Rs 1,20,000 crore on annual basis. And to support the scheme additional expenditure is required, which I presume would again a step toward few more scam and inefficient governance.

I don’t know, I may be wrong but I believe, this Food Security Bill will prove to be mere a burden on Indian government. Why I am saying this because of two main reasons. First, to execute this scheme efficiently government needs 65 million metric tonnes of grains. Moreover, to achieve this target it buys out grains from the farmers. If for any reasons farmers are not able to deliver the quantity, in that case government will not be having any option other than to import to achieve its goal which eventually aid in widening trade deficit which ultimately increase Current Account Deficit. Second reason, I would like to make you understand with an example. As we know, according to National Food Security Act, government is likely to feed around 70 percent of population with subsidised food grains at an average price of two rupees per kilogram. Government also provide subsidies to farmers for seeds, fertilisers, etc which ultimately bring down the cost of production say, 10 rupees per kg. But these 10 rupees are still higher than price which government provide say 2 rupees per kg of wheat or rice. And this price difference will create the opportunity for farmers.  So why would any farmers like to produce any other crop. All would rush to produce only grains which come under the umbrella of Food Security Act. Henceforth, will distort the market of other crops, which again in long run swells the load on the shoulders of government and aid stimulating further the increase in Trade deficit along with subsidies.

This is pretty much clear from the above discussion that India’s stand of opposing the proposal of peace clause which was proposed by developed countries is only to provide security of its National Food Security Bill at home. But India’s position will distort not only the domestic market but international market as well. Subsidies will pull the cost of production down. And these low cost grains are very much able to demolish any market as India can easily dump its grains in other market. 

What could be the solution of this? I believe their exist no short term solution but yes in long term, if the government of India instead of providing subsidies, invest this money development of infrastructure (roads, ports, warehouses, storages, etc) would definitely support not only the farmer or poor people but whole nation. This increases the productivity of every single person and will make them independent. 

Subsidies or Food security or reservations are not the solution of anyone’s problem rather these are politically motivated measures for ‘vote security’. These moves would make people of India lethargic and more dependent on government and these for sure would not help in countries growth.