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Prabhu's dilemma: Maintaining peace or go for permanent solution

Commerce Minister Suresh Prabhu has to present a permanent solution to replace the peace clause achieved at 11th inter-ministerial conference of World Trade Organization, or WTO at Buenos Aires, Argentina in second week of December.

twitter-logoAnilesh S Mahajan | November 13, 2017 | Updated 20:14 IST
Prabhu's dilemma: Maintaining peace or go for permanent solution

In his recent meeting with country's agriculture minister Radha Mohan Singh, Punjab's chief minister Amarinder Singh demanded additional allocation of roughly 2,000 Cr to pick up 20 million tonnes of paddy straw. Punjab's Remote Sensing Centre alone has witnessed more than 20,000 instances of paddy straw burning between October 15 & mid-November. Same is the scenario in other neighboring states Haryana, Rajasthan and UP. This is one of the biggest reasons for the smog cover over the national capital Delhi and regions around.

Like Amarinder, the other chief ministers from these states are working with the policy makers at Krishi Bhawan - offiice of agriculture minister - are burning midnight oil to save the interests of the farmers and balance it out environment needs. But at the adjoining building - Udayog Bhawan - country's commerce minister Suresh Prabhu is battling another pressure. This would be one of the first big negotiation for Prabhu after he assumed this office in September this year. He has to present a permanent solution to replace the peace clause achieved at 11th inter-ministerial conference of World Trade Organization, or WTO at Buenos Aires, Argentina in second week of December.

At present, India has two big issues. A) revisit Agreement on Agriculture, or AoA & B) exclude purchases from resource poor farmers for computing product-specific subsidies. Most of the straw burning or debt is taken by the small and marginal farmers. The calculations of Aggregate Measurement Support, or AMS exclude resource poor farmers-only if support is not 'trade-distorting'-which is too difficult to determine. Among other things, the provisions of AoA, restricts member countries, including India, to not to give agricultural subsidies in excess of 10 per cent of its agricultural GDP. This means, if India led by Prabhu agrees to this, the MSP will have to be drastically cut, and the future will be grim. For calculations purpose, the external reference point or ERP is from the base year 1986-88.  For example, in 2016/17 for wheat MSP was at $226 per tonne (Rs 1550 a quintal), where as in 1986-88 based ERP it had to be $130 for the same quantity. Comparing the current MSP with the ERP of three decades before, results in 'artificially' inflated subsidy. This inevitably results in the AMS exceeding the 10 per cent ceiling fixed under the agreement. It is almost impossible for India to safeguard the interests of small famers, especially with the diverse demography of farmers, & they largely are not so well to do. The states like Uttar Pradesh, Maharashtra, Punjab, Rajasthan are at various stage of helping the smaller famers in their respective states to waive off debt, along with this, most of the states subsidies farm inputs including cheap electricity, seeds, fertilizers et al.

Agreeing to these dotted lines from the developed world would mean, India might not be able to 'help' farmers. Prabhu's negotiators argue, the subsidies are given under green box and elimination of hunger, and should not be categories under the subsidies. Incidentally, India ranks at 100 among 119 on hunger index. But the negotiators from the developed countries disagree and consider these doles as trade distorters.

In December 2013, at Bali round of ministerial, India under the then commerce minister Anand Sharma agreed to WTO for peace clause. Under this settlement, the developing countries were given four years time to find the final solution, and to ask WTO to address the issue of food security. This means, the peace clause would go in 2017. If we trust the bureaucrats working on Indian strategy, there is no guarantee of permanent solution. & continuation of peace clause is good enough permanent solution, till the real one is not achieved. The Bali round was considered as disaster for India, as the peace clause restrict developing countries, including India, to not to export along with maintaining and sharing of the data on food procurement, stockholding, distribution and subsidies. If a better permanent solution is not achieved, Buenos Aires would be considered bigger disaster.

To push the envelope, India is asking the developed countries to eliminate AMS. This stance of India has already given India support of nearly 100 other member countries, including China. & this association can help India to achieve better permanent solution. His predecessor, Nirmala Sitharaman, first year in her office, made it clear to the WTO negotiators that India will not compromise on two must haves. At Nairobi edition of the ministerial in 2015, it was considered a takeoff from India's stance at Bali. & now inter-ministerial group of WTO member countries is all set to gather again, the line for Prabhu is clear, ie, go aggressive and disagree. The dissent should mean extension of peace, if not permanent solution.

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