Paswan's wish to hike food handouts could further undermine WTO deal

The Food Minister was quoted as saying that he wanted to increase monthly handouts to 7 Kg from 5 Kg

Government should increase handouts of subsidised grain, Food Minister Ram Vilas Paswan was quoted as saying, in a move that would backtrack on long-term commitments to reduce food stockpiling and undermine vestigial hopes of salvaging a global trade accord.

Paswan said in a newspaper interview that Prime Minister Narendra Modi's four-month-old government wanted to hike monthly handouts of food grains like rice by 40% from the current five kilogrammes per person.

"The focus of the government would be on providing food security to all," Paswan told Economic Times. "With huge stocks of grain in the country we want to increase (the) monthly entitlement to 7 kg."

It was not immediately clear whether Paswan, who represents a regional party in Modi's nationalist coalition, was speaking on behalf of the government.

If implemented, an increase in distribution of cheap food to the bulk of India's population would run counter to Modi's strategy of financial 'inclusion' that foresees gradually shifting to paying welfare benefits in money; and not in kind.

It would also boost the food subsidy bill that is already budgeted at $19 billion for the fiscal year through to March 2015 at a time when Finance Minister Arun Jaitley faces a challenge to meet fiscal targets.

India is at loggerheads with the World Trade Organization over its decision to veto a landmark accord because it wanted more attention paid to its demand to be able to stockpile subsidised crops to ensure security of supplies.

In a filing earlier this month, government disclosed that it spent a total of $56 billion on farm support and food stockpiling in 2010-11, arguing that it was conforming to agreed limits on agricultural subsidies.

India's veto has derailed implementation of the WTO trade facilitation agreement struck last year in Bali that would have simplified and standardised procedures for moving goods across borders.

The deal was the most significant achievement in the WTO's 19-year-old history and, according to some estimates, would add $1 trillion and 21 million jobs to the world economy.