India’s ‘wheat waiver’ WTO demand is risk-fraught

The WTO ministerial meeting in June at Geneva did precious little to address the issue of public stockholding of food.

Public stockholding issue at WTO

India’s PSH policy is based on procuring food from farmers at an administered price (minimum support price or MSP), which is generally higher than the market price.

PSH’s’ twin objectives: The PSH policy serves the twin objectives of offering remunerative prices to farmers and providing subsidised food to the underprivileged.

Trade distortion subsidy: Under WTO law, such price support-based procurement from farmers is counted as a trade-distorting subsidy, and if given beyond the permissible limit, breaches WTO law.

India in the World Trade Organization (WTO) — and rightly so — has been to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).

Peace clause: Currently, India has temporary relief due to a ‘peace clause’ which bars countries from bringing legal challenges against price support-based procurement for food security purposes.

The WTO ministerial meeting in June at Geneva did precious little to address this issue.

 India’s concerns about the PSH issue have been taken on board.

India’s concerns

For India, the real issue is not about maintaining adequate food stocks, which WTO rules do not prohibit, provided food is stocked by employing non-trade distorting instruments such as providing income support to farmers (cash transfers independent of crop production).

Use of MSP: India’s concern is that it should have the policy space to hold public food stocks using the MSP, which is a price support instrument.

However, there is no mention of price support in the Geneva declaration.

India’s demand for a permanent solution to the PSH policy has acquired a new dimension.

India insists that it should also be allowed to export food, most notably wheat, from the pool of the foodgrain procured under the MSP.

However, WTO law proscribes countries from exporting foodgrain procured at subsidised prices.

Paragraph 4 of the 2013 WTO decision on PSH for food security purposes, clearly states that countries procuring food for food-security purposes shall ensure that such procured food does not “distort trade or adversely affect the food security of other Members”.

The same spirit is reflected in paragraph 10 of the Geneva ministerial food security declaration, which states that countries may release surplus food stocks in the international market in accordance with WTO law.

 However, it is very unlikely that such a request will be acceded to.

As per Article IX.3 of the WTO Agreement, waivers can be adopted only in “exceptional circumstances”.

Way forward

Developed countries have historically opposed India’s PSH programme as they apprehend that India might divert some of its public stock to the international market, thus depressing global prices.

India actively pushing for exporting food from its official granaries gives fresh ammunition to the PSH solution opponents.

Thus, India should revisit its stand on asking for a waiver for wheat exports from its public stockholding, which, in any case, was not a part of India’s PSH policy.

Spending scarce negotiating capital on this issue might dilute India’s core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security and providing remunerative prices to the farmers.

Negotiations at the WTO require crystal clarity of the core objectives that should be relentlessly pursued.

Adding newer objectives and shifting goalposts might result in falling between two stools.

New E-waste Rules threaten jobs, collection network

A proposed framework by the Centre for regulating e-waste in India has upset a key link of India’s electronic waste collection system and threatens the livelihood of thousands of people.

Menace of E-Waste in India

Electronic waste, or electronic goods that are past their productive life and old parts, is largely handled by India’s vast informal sector.

Spent goods are dismantled and viable working parts refurbished, with the rest making their way into chemical dismantling units.

Many of these units are run out of unregulated sweatshops that employ child labour and hazardous extraction techniques.

Remedy against this: Extended Producer Responsibility (EPR)

To address all of this, the Environment Ministry brought the E-waste (Management) Rules, 2016.

This introduced a system of Extended Producer Responsibility (EPR) compelling makers of electronic goods to ensure a proportion of the goods they sold every year was recycled.

They are expected to maintain records annually demonstrating this.

Most companies however did not maintain an in-house unit in charge of recycling and this gave rise to a network of government-registered companies, called Producer Responsibility Organisations (PRO).

How PROs work?

PROs act as an intermediary between manufacturers and formal recycling

They are (expected to be) technologically equipped to recycle end-of-life electronic goods safely and efficiently.

The PROs typically bid for contracts from companies and arrange for specified quantities of goods to be recycled.

They provide companies certified proof of recycling that they then maintain as part of their records. Several PROs work on consumer awareness and enable a supply chain for recycled goods.

Functional PROs in India

As of March 2022, the Central Pollution Control Board (CPCB) has registered 74 PROs and 468 authorised dismantlers.

They have a collective recycling capacity of about 1.3 million tonnes.

What is the extent of E-Waste production in India?

The Ministry estimated 7.7 lakh tonnes of e-waste to have been generated in 2018-19.

Around one million tonnes in 2019-20 of which only a fifth (about 22% in both years) has been confirmed to be “dismantled and recycled”.

What is the controversy now?

This May, the Ministry issued a draft notification that does away with the PROs and dismantlers and vests all responsibility of recycling with authorised recyclers.

Only a handful of authorised recyclers exist in India.

Recyclers will source a quantity of waste, recycle them and generate electronic certificates.

Companies can buy these certificates equivalent to their annual committed target and thus do not have to be involved with engaging the PROs and dismantlers.

Dismantling a fledgling system was detrimental to the future of e-waste management in India.

What is the rationale behind?

The Centre has not explained its rationale for dismantling the existing system in its draft notification.

However, a final policy is yet to emerge.

The new rules would track the material that went in for recycling with the output claimed by a recycler when they claimed GST (Goods and Services Tax) input credit.

Curbing inflation in tomatoes, onions and potatoes requires streamlining their value chains

The higher the weight of food in the overall CPI, the more difficult it is for the monetary policy squeeze alone to contain inflation.

Inflation challenge in Indian economy

Under the FRBM Act, The RBI has the unenviable task of keeping inflation within the 4+/-2 per cent range.

But lately, despite its best efforts, inflation has remained defiant and above its tolerance band.

The RBI’s major policy tool, the repo rate has already been hiked by 90 basis points, raising it to 4.9 per cent in June.

It is likely to rise to at least 5.5 per cent, if not more, over the course of this financial year.

But this will not be enough to tame inflation due to the nature and structure of inflation in India.

How India’s CPI basket is different

The CPI basket in India comprises of 299 commodities grouped into six major categories.

 The food and beverages group has a weight of 45.86 per cent (with food at 39.06 per cent, prepared meals at 5.55 per cent and non-alcoholic beverages at 1.26 per cent).

High weight of food in overall CPI: It is this overwhelmingly high weight of food in overall CPI, based on the consumer expenditure survey (CES) data of 2011-12, that distinguishes Indian inflation from many other developed countries where the food weight is much smaller.

It is much lower in Germany (8.5 per cent), the UK (9.3 per cent), the US (13.42 per cent), Canada (15.94 per cent), France (16.49 per cent), Australia (16.8 per cent), China (19.9 per cent), and Japan (26.3 per cent). Even developing nations like South Africa (17.24 per cent), Brazil (25.5 per cent), and Pakistan (34.83 per cent) have lesser weightage of food in overall CPI than India.

 The higher the weight of food in the overall CPI, the more difficult it is for the monetary policy squeeze alone to contain inflation.

Tomato inflation

Interestingly, of the 299 commodities that comprise CPI, the highest contributor to overall inflation was tomatoes at 8.9 per cent.

Inflation in tomatoes was stupendously high at 158.8 per cent (year-on-year).

One of the prime reasons was the low base effect as inflation in June 2021 was minus 14.4 per cent.

Due to low price realisation last year, this year tomato farmers shifted acreage to other crops.

On top of that, some tomato growing areas got flooded, while many others faced heat waves that further depressed tomato supplies.

 It is for this reason a scheme called TOP (Tomatoes, Onions, and Potatoes) and allocated Rs 500 crore to streamline their value chains.

 But the scheme went to the Ministry of Food Processing, and was expanded to TOTAL by including several other vegetables.

Without having a champion, like Verghese Kurien was for milk, this scheme (from TOP to TOTAL) got diffused in focus and has not shown any visible impact in improving the value chains of vegetables.

Way forward: The real solution to tomato inflation may lie beyond the ambit of the RBI.

Processing: It requires linking tomato value chains to processing of at least 10 per cent of tomato production into tomato paste and puree during bumper years and using them when fresh tomato prices spike.

Reduce GST: Further, to enhance the affordability of processed tomatoes, its GST rates need to be reduced from 12 per cent to 5 per cent.

This would also help farmers to stabilise their incomes and avoid the typical cobweb problem they face in case of perishables.

Way forward

So, monetary policy alone may not be as effective in the Indian case.

Revise CPI: India desperately needs to revise its CPI with the latest consumption survey weights.

Our parliamentarians must recognise the limitations that the RBI faces in taming inflation.

Exercise AL NAJAH-IV

India and Oman will carry out a 13-day military exercise with a focus on counter-terror cooperation.

Exercise AL NAJAH-IV

This is the fourth edition of India-Oman joint military exercise ‘AL NAJAH-IV’.

It is held between contingents of Indian Army and the Royal Army of Oman is scheduled to take place at the Foreign Training Node of Mahajan Field Firing Ranges.

The previous edition of the exercise was organised in Muscat in March 2019.

The scope of the exercise includes “professional interaction, mutual understanding of drills and procedures, the establishment of joint command and control structures and elimination of terrorist threats”.