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Opinion » Comment

Updated: August 2, 2013 01:17 IST

The shaky geopolitics of India’s food security

Arun Mohan Sukumar
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The UPA seems to have forgotten that the country’s trade commitments, including to the WTO, stand in the way of its implementing the Food Security Ordinance

The last time I began an essay with the words “in this era of globalisation,” in high school, even my teacher winced at the cliché. In junking the phrase, however, we may have forgotten its import too. The United Progressive Alliance (UPA) certainly seems to have, because it has pushed through a major food security initiative without so much as a murmur on how it will operate with respect to India’s international commitments.

Whatever the disagreement on the Food Security Ordinance (FSO), either on the political expediency which drove it, the size of the fiscal burden the government has to shoulder, or the criteria used to identify its beneficiaries, one aspect is beyond question: to fulfil the Ordinance’s mandate, governments would need to procure a lot more food grain than they do currently from Indian farmers and perhaps, through imports. If India intends to be self-sufficient in meeting food security requirements, our farmers must have an incentive to produce more, reflected in higher procurement prices and access to better farming inputs. At the same time, the Rangarajan Committee — constituted by the Prime Minister’s Office to “review” the National Advisory Council’s version of the law — has suggested India should procure only 30 per cent of the country’s total production from farmers. Anything more, the committee has warned, will result in a “distortion of food prices in the open market.” But unless our food production capacity somehow dramatically improves in the next few years, procuring 30 per cent from farmers alone will not meet the FSO’s requirements. In the interim, therefore, food imports are a reality.

During this period, the government needs to compensate farmers well, support the domestic agricultural sector and gain access to cheap food imports. If it fails in these objectives, the FSO will not only ratchet up India’s trade and fiscal deficit, but also fail to boost our own production capacity. This vicious cycle will eventually render the ordinance (by then a law, presumably) unsustainable.

Compensation for farmers

There’s only one problem: imports come cheap thanks to the heavy subsidies the West offers its agribusinesses. These subsidies must go if India’s farmers are to have any chance of competing against imports. What’s more, India’s commitment to the WTO prevents it from raising its Minimum Support Price to farmers by a high margin. With a view to ensuring food security, therefore, the ‘G33’ group of countries at the WTO — in which India has played a leadership role — has sought an exception to this rule. If the G33’s proposal were to be accepted, developing countries would retain the right to pay most of their farmers “above the market” (ATM) rates for procuring and stockpiling food grain.

Ironically, the UPA is yet to pay market rates, let alone above them, to farmers from whom it buys grain. For all its claims to make food security a priority, the government’s Minimum Support Prices for farmers in recent years have been well below those prevailing in the open market. Even so, if one were to give the UPA the benefit of the doubt and assume it will raise compensation for farmers now that the FSO is in place, the G33’s proposal is unlikely to gain traction at the WTO. The proposal to grant ATM rates to marginalised farmers in developing countries has been called a “trade distorting subsidy.” On the other hand, the West is nowhere near close to agreeing on a gradual reduction and eventual elimination of the massive subsidies it offers to large agri-businesses.

The UPA, racing to the 2014 election with blinders on, has finally realised its Food Security Bill cannot work without resolving both these concerns. But its hectic, eleventh hour efforts to curry favour at the WTO may not be successful: the G33 proposal will likely be staunchly opposed, especially by the United States, at the Bali ministerial meet this December. The group has now been offered a piecemeal “interim mechanism” that will allow specific countries to raise support prices for their farmers. But this is a temporary measure: sans the WTO’s green signal in December, India cannot incentivise its farmers without falling foul of its international commitments. If it still goes ahead, the West is entitled to retaliate with crippling trade countermeasures. Unless developed countries agree to cut their agro-subsidies, India will also see cheap food imports muscling domestic farmers out of business. What does this deadly combination of factors mean for the long-term viability of the Food Security Ordinance? Frankly, who cares? For the UPA, after all, the future is between now and May, 2014.

Safeguards

The issue of farming subsidies is particularly crucial in the context of the Indo-EU Free Trade Agreement (FTA). Under the FTA, trade tariffs for agricultural products will be brought down dramatically. Once the floodgates open, food and dairy products from Europe — that have long enjoyed the EU’s political patronage — will easily displace the indigenous market, severely denting our agrarian sector. This is not to say the FTA should be abandoned altogether. The agreement is crucial for India to access better technology (in agriculture) and gain entry into Europe’s lucrative markets in other sectors. But before the FTA is inked into existence, India should incorporate safeguards for its farmers, at least keeping food security in mind. If our farmers stand no chance against the massive production capacity of agri-businesses in Europe, the government can kiss self-sufficiency goodbye.

Prime Minister Manmohan Singh and his government have hastily materialised a populist, but much-needed legislation, without laying the foreign policy foundations for its continued existence. WTO rules need to be renegotiated to accommodate higher procurement rates for India’s farmers. Wrinkles in the Indo-EU Free Trade Agreement need to be ironed out, if our agricultural sector is to be strengthened. These objectives require hard-nosed bargaining and adept diplomacy from New Delhi. They certainly cannot be achieved in a few months — unless these measures are in place, the FSO will whimper to a slow death in a matter of years. Food security, a national imperative of enduring significance, cannot be relegated to a legislation that refuses to see beyond the next general election.

arun.sukumar@thehindu.co.in

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Some numerical analysis would be great to support the various hypothesis. No one
can argue with the morality of providing food to hungry. But could we have
approached a more creative approach at eradicating hunger than expanding PDS?

from:  sj
Posted on: Aug 3, 2013 at 18:58 IST

With any massive government undertaking, there will also be a massive government scam. I expect plenty of bureaucrats to line their coffers with this one. The only way India can move into the 21st century and be self-sufficient is if they gradually move these farmers to a different sector of the economy and promote agri-business like in the west. Less governing, less regulation and less mismanagement can only help at this point.

from:  Nikhil Kumar
Posted on: Aug 3, 2013 at 01:18 IST

There is nothing sacred about Rangarajan committee. The views of such committees themselves are highly distorted due to the "advance" payment the members receive from the corporates who engage in agri market and speculation. It is obvious that Rangarajan is suggesting that by procuring only 30% grain produced in India and remaining at exhorbitant cost from abroad Rangarajan (and the author) betrays their real intentions.
Both Rangarajan and the author be consigned to trashbin for the financial security and food security of India.

from:  Janarddan
Posted on: Aug 2, 2013 at 14:24 IST

I am a little confused about the basic premise of this article - that
India will need to import foodgrains to implement the FSO programme.
The author states: "to fulfil the Ordinance’s mandate, governments
would need to procure a lot more food grain than they do currently
from Indian farmers and perhaps, through imports."
India's foodgrain production stands at 250 mn tonnes. The minister in
charge of PDS, K V Thomas has stated in a recent news article that we
need 62 mn tonnes for this programme. He also states that projections
show that we will have sufficient foodgrains to meet this need. A
recent article by the Jean Dreze also mentions that one of the
problems in PDS is that 'excessive' foodgrains due to large increases
in production in recent years being pushed into APL quota.

How then will a situation of having to import foodgrains arise? Would
the author provide some facts to help us understand this situation
better?

from:  FNussjen
Posted on: Aug 2, 2013 at 14:13 IST

I live in the West and I'm astonished at the idea that food and dairy from the EU will
displace indigenous producers. I visit my parents every year and I can vouch that food items in India cost a fraction of what they cost overseas. Im happy to provide prices in needed.
The myth of cheap overseas food is one that has been peddled for some time now
mostly to justify retail FDI. I'm surprised to find it here.

from:  David Lewis
Posted on: Aug 2, 2013 at 13:08 IST

I agree with the author. There was no need to carry out the food
security exercise on such a large scale. The government should have
restricted this to benefit those below the poverty line and see how it
works on the ground. Instead, the government seems to be in great hurry.
This can backfire causing lot of confusion and mismanagement in the end.

from:  Pramod Patil
Posted on: Aug 2, 2013 at 06:52 IST

Finally an objective exposure of the government's populist obsession ignoring its obligations
to the nation's farmers to sustain profitability and to International obligations and import
pitfalls. I am sure that the Congress attack machine and the liberals and their friends in the
media will waste no time in condemning the writer for pointing out the short sightedness of
the government and its single minded obsession to win in 2014 at any cost to the nation.

from:  Ramakrishnan
Posted on: Aug 2, 2013 at 03:27 IST

The Question that Needs to be asked is Why was PDS subsidy continuously cut by the Central Govt? There is no need for Food Ordinance if PDS subsidy is continues.

from:  Ganapathi Iyer
Posted on: Aug 2, 2013 at 03:03 IST
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