India has become the first country to have invoked the ‘peace clause’ of the World Trade Organisation (WTO) for exceeding the ceiling on support it can offer farmers for rice in the year 2018-19. The government through a notification to the Committee of Agriculture, WTO on March 30th 2020 informed that the value of its rice production in 2018-19 was $43.673 billion, while its total support through different measures for rice farmers was $5.004 billion. The support for farmers thus comes to 11.46% of the value of production against the allowed limit of 10%.
Before the harvest during each Rabi/Kharif crop season, India announces the minimum support prices (MSP) for procurement on the basis of the recommendation of the Commission for Agricultural Costs and Prices (CACP), which along with other factors, takes into consideration the cost of various agricultural inputs and a reasonable margin for farmers for their produce.
The centre and state governments, through their agencies such as Food Corporation of India (FCI), National Agricultural Cooperative Federation of India (NAFED) and others, procure foodgrains from farmers at the MSP in order to meet the overall demand of different welfare schemes.
What is the WTO Peace Clause?
Article 13 of the Agriculture Agreement protects countries using subsidies which comply with the agreement from being challenged under other WTO agreements.
·The WTO rules put restrictions on support that developing countries including India can offer their farmers as the WTO looks at such support measures as trade distorting.
·But due to India’s constant negotiations, WTO members adopted a decision at the Bali Ministerial Conference in 2013 on public stockholding for food security purposes.
·This decision allows developing members to invoke the peace clause to protect their public stockholding programmes from legal challenge.
·It is expected that other developing countries including Indonesia, Egypt and Pakistan, which run food security programmes similar to India, may soon follow suit.