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Tuesday, 2 March 2010

MISMANAGED…

India has been facing volatile prices of food grains for sometime now. With every passing day the prices have only jumped higher. When the very first signs of scarcity of grains and consequently high prices came to the forefront the government started looking for the triggering factors and very conveniently zeroed in on the drought last year. The rabi crop is expected to be good and this only corroborates the fact that the government’s troubles aren’t yet over. Hasty assessment of the scenario now has the government wondering where to store the coming stock.


The wheat output of the current year is expected to be around 80.28 million tonnes. In comparison to the previous year’s output which was 80.68 million tonnes, it is only marginally low. The current year’s output combined with the available reserves would have been sufficient to take care of the consumer demand. But the government simply wouldn’t budge from its stand of not releasing some part of the reserve stocks. This rigid stand on part of the government left the consumer with no other option than to bear the brunt of price rise and pay through his nose for essential commodities like wheat flour.

The government didn’t bother to look at the buffer stocks. As on October 2009, wheat reserves available with the government were about 30 million tonnes, which is way above the buffer norms of 11 million tonnes. The paddy reserves were also on the good side and were around 15 million tonnes. Agronomist Mr. Ashok Gulati says, “Experts had recommended that 5 to 10 million tonnes of wheat be released from government stocks in October 09 to help cool the prices.” Unfortunately, it is still to be implemented. When the Union Agriculture and Food minister Mr. Sharad Pawar was questioned about the reason behind this long delay he said, “Till a clearer picture on the rabi crop was not available, no such step could be contemplated.”

Very clearly, the panic button was pressed too early, without even once evaluating the backup options available. This led to brouhaha in the domestic market with traders buying huge amounts of commodities which left the market empty. Then these products were sold at unreasonable prices to the consumer, burning a hole in his pocket. Agriculture experts also agree that more responsible behaviour on part of the agriculture ministry would have been beneficial in tackling the price rise. Rather than making statements which led to confusions in the market, Mr. Sharad Pawar could have utilised that time to for considering some relevant issues.

The crop coming in April has the hopes of the entire country pinned to it. “So far, the wheat crop looks good with low average temperatures through December and much of January resulting in excellent tillering. We have seen more numbers of tillers (stems) being produced this time,” said Dr. S.S Singh, head of Directorate of Wheat Research (DWR) at Karnal, Haryana. The coming few days will be crucial as the kernel will gain most of its dry weight. The temperature must not shoot up abruptly or else early maturing of the crop will lead to a yield loss of about half-a-tonne per hectare. In the year of 2005-06, abrupt temperature changes in March made India’s wheat output take a nose dive. Last three years saw no peculiar mercury movements. This year December was fine, but what March has in store remains to be seen. However the rain showers in the month of February so far have been helpful in keeping a tab on the temperatures. The favourable weather conditions, early sowing and no disease in any region are understood to have prompted the good crop.

The coming crop will help check the ever-increasing prices. But this won’t end the country’s woes. Because of the long delay in the release of the reserve stocks, the government is now staring at a storage problem. Adi Narayan Gupta, Chairman, Wheat Products Promotion Society said, “The government must speed up the sale of wheat stock under the Open Market Sale Scheme (OMSS) from its reserve stock as Food Corporation of India (FCI) and state procuring agencies would face huge problem in storing the new crop which will start arriving in the markets soon.” Wheat planted in October accounts for 70% of the India’s winter sown grains.

Since the open market prices are unlikely to offer any incentives over the government’s minimum support price (MSP) of Rs. 1100/ quintal, the FCI will end up buying most of the crop. This will only aggravate the storage problem. Also with the government planning to release some of the surplus crop and new crop coming in about a month, a glut scenario is likely.

The consumers can gradually relax, but the government has a long way to go in a short span of time. The only end in sight so far is that the government may end up subsidizing exports as has been often done before. Some timely decisions and planning based on sound evaluation of expert opinions and support options available would have been instrumental in avoiding this self-imposed crisis.