Public Stockholding

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Public Stockholding

Public Stockholding

Context: At the 13th ministerial conference of the World Trade Organization (WTO), a robust position concerning
the permanent solution for public stockholding for food security was asserted by India.

About:

• Definition: Public stockholding involves governments purchasing, storing, and distributing food grains to ensure food security for their population.
• Purpose: Countries like India adopt this system to create a food buffer against potential shortages caused by factors such as droughts, crop failures, or market disruptions.

• Advantages of Public Stockholding:
o Food Security:
▪ Public stockpiles ensure food availability, particularly during emergencies, safeguarding against food shortages.
o Price Stabilization:
▪ Governments release stocks during price spikes caused by supply shortages, moderating price fluctuations and preventing excessive burden on consumers, especially low-income households.
o Support for Farmers:
▪ Governments purchase grains at minimum support prices, providing income security to farmers. This incentivises agricultural production and sustains output.
o Social Welfare Programs:
▪ Stockpiled food can be used for social welfare initiatives, supplying subsidised food to vulnerable populations and those experiencing food insecurity.

• Disadvantages of Public Stockholding:
o Fiscal Burden:
▪ Maintaining large stockpiles incurs high costs in terms of storage and maintenance, straining government finances and diverting resources from other development priorities.
o Market Distortion:
▪ Subsidized food grains from public stockpiles can depress market prices, discouraging private sector investment in agriculture and potentially affecting overall production efficiency.
o Spoilage and Waste:
▪ Improper storage practices lead to spoilage and wastage of food grains, resulting in economic losses and undermining the effectiveness of the program.
o Corruption Risks:
▪ The management of public stockpiles is susceptible to corruption and mismanagement, causing inefficiencies and leakages within the system.
o International Trade Issues:
▪ Subsidized stockpiling practices can create trade friction. Some countries argue that such practices distort fair market competition and disadvantage exporters from other nations.
▪ For example, Thailand recently accused India of using its public rice stockpiles, intended for domestic food security, to gain an unfair advantage in the export market.

Key Points Raised by India at WTO

Shift in WTO Focus	India urges WTO to move beyond catering solely to agricultural exporters\' trade interests. Instead, prioritize food security and sustaining livelihoods
Importance of Public Stockholding Programs	Public stockholding is crucial for developing countries to ensure food security, especially for vulnerable populations. India seeks a permanent solution within WTO rules to support these programs.
Support for Special Safeguard Mechanism (SSM)	India and G-33 nations uphold the right of developing countries to use the SSM against import surges or price declines.
Call for Level Playing Field	India stresses the need for a level playing field in international agriculture trade, particularly for low-income or resource-poor farmers. There are disparities in domestic support, with subsidies in developed countries significantly higher than those in developing nations.

Key Features of WTO Agreement on Agriculture (AoA)

Objective	Promote fair trade in agricultural products by reducing trade barriers and regulating domestic support.
Reduction of Trade Barriers	Encourages member countries to reduce tariffs, quotas, and other restrictions on agricultural imports.
Regulation of Domestic Support	Regulates the types and levels of subsidies that governments can provide to domestic agricultural producers
Market Access	Promotes greater market access for agricultural exports by reducing import barriers
Agriculture Subsidy	Limits agricultural subsidies to 10% of the value of agricultural production for developing countries, with certain protections.
Peace Clause (December 2013)	WTO members agreed not to challenge breaches of the subsidy ceiling by developing nations at the dispute settlement forum until a permanent solution is reached.
India\'s Rice Subsidy Issue	India\'s subsidy on rice exceeded the WTO threshold on multiple occasions, leading it to invoke the \'peace clause\' to avoid challenges at the WTO dispute settlement forum.