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Curb speculation, scrap biofuel sops in India to check food price volatility: FAO panel

According to reports, speculation on the futures market and diversion of food for energy use in the form of biofuels, among a few other factors, has contributed to food price volatility of recent years.

Transparency in the futures markets and tighter regulation of speculation is necessary while governments must abolish targets and remove subsidies on biofuels, Dr M.S. Swaminathan-led High Level Panel of Experts on Food Security and Nutrition at the FAO (Food and Agriculture Organisation) said in a report released recently. Making a series of recommendations on ways to tackle food price volatility that hurts millions of people and undermines their nutritional status and food security, the expert panel has pointed out that trade rules must take into account the compulsions of sovereign states to serve their domestic priorities and that multilateral rules have become more essential than ever because of the heterogeneity of the WTO members.

Pointing to the close relationship between stock levels and price volatility, the panel has recommended international cooperation regarding world food stocks and food security, including the establishment of guidelines for the efficient management of such stocks.

For addressing the challenges of food security, the expert panel has highlighted stable and sustainable long-term investment in agriculture as a necessary condition, while recommending a significant global expansion in funding for agricultural research and development.

As food security is a complex and multi-dimensional issue and a national responsibility, countries need a comprehensive food security strategy appropriate to its specific conditions, the report said.

Coming down heavily on diversion of traditional food for biofuels, the expert panel asserted that by generating a new demand for food commodities that can outbid poor countries and food-insecure populations, industrial biofuels highlight the tension between a potentially unlimited demand (in this case, energy) and the constraints of a world with finite resources.

Several proposals linked to changes in existing mandates could reduce the likelihood of biofuel production contributing to price spikes, the report observed.

On speculation infood markets, the panel has argued in favour of tighter regulation. Increasing transparency, by requiring exchange trading and clearing of most agricultural commodity contracts, and setting lower limits for non-commercial playerscould be the first set of measures taken by the countries that house major commodity exchanges, the panel observed.

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