India’s notification to the WTO on breaching the prescribed subsidy limit for its public stockholding programme for rice has raised questions.

Some countries have sought an explanation over a difference of seven million tonnes between the available and actual stocks in 2020-21.



  • The term ‘peace clause’ has been a cause of disquiet ever since India dug in its heels on the issue of domestic food security.
  • The major discussion around this clause is the question:
      • Should the WTO have a say in India’s policy of buying foodgrain at a fixed price from farmers and supplying it below cost to the poor?
  • The stockholding programmes are considered to distort trade when they involve purchases from farmers at prices fixed by the governments.
  • Normally the support is within the agreed limits but some countries fear this might not always be the case.
      • These countries fear that this could breach the limits they have agreed on trade-distorting domestic support — ie, support that influences prices and quantities.


What is ‘Peace Clause’?

  • The ‘peace clause’ said that no country would be legally barred from food security programmes even if the subsidy breached the limits specified in the WTO agreement on agriculture.
      • Subsidy ceilings fixed by WTO stands at 10 per cent of the value of food production in the case of India and other developing countries.
  • It was in Bali in 2013, but with conditions added to deal with fears that stockholding programmes involving purchases at supported prices could affect other countries.
  • Governments seeking the shelter of the peace clause have to —
      • avoid distorting trade or impacting other countries’ food security, and
      • provide information to show they are meeting those conditions.
  • This ‘peace clause’ was expected to be in force for four years until 2017, by which time members hoped to find a permanent solution to the problem.



  • In June 2022, the US and other WTO Members announced that they are initiating consultations with India on their trade-distorting rice subsidies.
  • Issue raised by these countries —
      • Much of India’s exported rice benefits from the government-established floor price, and then exported at low prices, distorting trade. India makes up nearly half of global rice trade.
      • According to its notifications, India’s market price support for rice totalled approximately $5 billion in 2019, $6.32 billion in 2020, and jumping to $6.9 billion in 2021.
      • Based on India’s reported values of production — $43.67, $46.1, and $45.6 billion, respectively — the support levels have been 11.46, 13.71, and 15.14 percent, exceeding the 10 percent de minimis limit.
      • However, actual support is likely much higher – more than 80 percent.
      • This is because India only includes actual procurement, not total production, in its calculations, contrary to WTO rules and precedent.


India’s response

  • India is the only country to notify the breach
    • India agrees they exceeded their de minimis limits for rice subsidies in the three years.
    • It has claimed shelter from a WTO dispute settlement challenge under the ‘Bali Peace Clause.’
      • This clause protects Indias food procurement programmes against action from WTO members in case the subsidy ceilings are breached.
      • India had earlier invoked the clause for 2018-19, when it became the first country to do so.
  • The reported gap is due to damages
    • The government has told the agency that the gap of around $2.6 billion was on account of damages due to multiple factors, including pollution and moisture.
      • The procurement agencies purchase paddy. Around two-thirds of the paddy that is procured is milled into rice.
      • Government officials have argued that this could be a major reason for the gap.
    • It has dismissed suggestions that rice procured by government agencies for public distribution has been diverted or routed for exports.