The Hindu Business Line : Monsoon worries — No threat to food security

The performance of the farm sector in 2004-05 was below-average because of the uneven distribution of monsoons across agro-climatic zones. This phenomenon may well recur in the months ahead. But, as there are enough stocks of wheat and rice to last till the next season, the impression that imports may have to be resorted to because of monsoon failure is baseless, points out G. Srinivasan.

India has sufficient wheat stocks to see it through a poor monsoon. — Kamal Narang

THE INDIAN economy's dependence on the monsoon is proverbial, as any aberration in the weather pattern hits everybody in this largely agrarian economy in one way or the other. So the forecast by the India Meteorological Department (IMD) and the Council for Scientific and Industrial Research (CSIR) for a normal monsoon in 2005-06, with the recent showers in the south-west region bearing out the salutary tidings, gives room for hope.

Yet, the performance of the farm sector in 2004-05 was below-average because of the uneven distribution of monsoons across space and time in various agro-climatic zones, and the possibility of this phenomenon recurring in the months ahead cannot be ruled out.

The Agriculture Ministry estimates for 2004-05 suggested that foodgrain production was likely to decline by about 1.5 per cent from 213.5 million tonnes in 2003-04 to 210.4 million tonnes in 2004-05.

But for the upward revision in estimates by close to four million tonnes in January 2005, the decline in foodgrain production would have been much sharper. The upward revision concerns the output of wheat and pulses.

Wheat output is now estimated at 74 million tonnes (mt) compared to 73 mt indicated earlier — a 2.8 per cent increase over the previous year's output of 72.1 mt. In spite of this modest revision, economists reckon that the erratic distribution of monsoon rainfall in recent years might be partly responsible for the dismal productivity.

According to a study by the National Council of Applied Economic Research (NCAER), "the larger picture is related to the slowdown in technological development and investments in the agricultural sector".

For instance, trends in investment (gross capital formation) in agriculture, including forestry and logging and fishing, show that while public investment, as a share in GDP, declined from 0.57 per cent in 1993-94 to 0.36 per cent in 2003-04, that of private investment fell from 1.2 per cent of GDP to 1.18 per cent during this period. Overall, the percentage share of investment in agriculture during the decade has slid from 1.77 per cent of GDP to 1.55 per cent of GDP.

It is small wonder, then, that the United Progressive Alliance (UPA) Government that came to power on the assurance of safeguarding the interest of kisans and farmers has had to put in place a slew of farmer-friendly initiatives, including an increase in farm credit and other programmes relating to irrigation and input services to the farm sector.

Against Rs 1,04,500 crore fixed as the target of farm credit flow for 2004-05, the flow of institutional credit to this sector was expected to be Rs 1,08,500 crore. Hence, the target for this fiscal is pegged at Rs 1,41,000 crore — a 30 per cent increase.

However, with the decline in foodgrain production in 2004-05 and the stock position in recent months, the Ministry of Consumer Affairs, Food and Public Distribution, is hard-pressed to contain misinformation from spreading in the market, damaging the interests of farmers as also consumers, particularly about the possibility of India going in for wheat imports after a gap of six to seven years.

The country's food security system is confined almost wholly to provisioning cereals. It comprises the Food Corporation of India (FCI) which implements the minimum support price (MSP) for cereals, holds buffer stocks and delivers grain to a public distribution system (PDS) that has a network of four lakh fair-price shops.

It is altogether a different story that with economic liberalisation and market forces dictating the demand-supply balance, a large number of people came out of the PDS on their own even as their incomes and consumption patterns underwent a dramatic shift.

But the Planning Commission perceptively stated in its Mid-Term Appraisal Report to the Tenth Plan panel that since its inception after the food shortages of the mid-1960s, the PDS has managed to help the country avert famine, contain food price gyration to much less than in world markets and offer enough price support for farmers to nearly triple cereal production.

But, according to the Plan panel, the yield deceleration from the early 1990s had cost implications that complicated the reconciliation of the producer, consumer and fiscal interests, especially with the MSP being used in the early 1990s as an instrument to compensate farmers for cuts in fertiliser subsidy.

However, the government introduced the targeted PDS (TPDS) in 1997 to counter the criticism that the PDS did not deliver adequately to the poor. The TDPS replaced the earlier universal PDS entitlements with differential pricing for the below poverty line (BPL) population and those above the poverty line (APL).

Besides, there is also the Antyodaya Anna Yojana (AYY) which now covers 2.5 crore BPL families. In all these schemes, the entitlement per household is 35 kg per month with the mix of grains being left to individual choice. In the case of BPL (other than AYY) there is a rate fixed for wheat and rice that is higher than the AYY price, and in all, the criterion is that the BPL price should be 50 per cent of economic cost; APL price 70 per cent of economic cost and AYY price 25 per cent of economic cost.

The Secretary, Department of Food and Public Distribution, Mr S. K. Tuteja, told Business Line at an interface that the prices of these subsidised grains had not been revised in the last three or four years.

He said that based on "our own estimates" drawn from the Planning Commission, the Centre makes allocations for each State and the total cardholders across the country number 6.5 crore.

Even when the 2005-06 Budget hiked the number of AYY recipients from 2 crore families to 2.5 crore, the number of cardholders was pegged at 6.5 crore, with the result that the subsidy cost to the Centre will go up slightly as a AYY beneficiary has to bear only 25 per cent of the economic cost of grains supplied to him.

In the light of reports that the Government is set to slash this allocation of 35 kg for the beneficiaries of TDPS, Mr Tuteja firmly rules out any such a decision, as the stocks with the Government are sufficient to meet the needs of welfare schemes as also the food-for-work programmes.

No doubt, against last year's procurement of 168 lakh tonnes of wheat, the procurement this season has plummeted to 148 lakh tonnes, but this plus the buffer stock of 41 lakh tonnes is "good enough to take care of all our requirements", Mr Tuteja said, adding that "procurement is a function we discharge to see that there is no distress sale. If a farmer can get a better price than the MSP, he is free to sell as we do not have a target for procurement".

It needs to be noted that the decentralised procurement scheme, introduced by the erstwhile National Democratic Alliance (NDA) government, has been made attractive. The system is in operation in ten States/Union Territories, over and above the one by the Central procurement agency, the FCI.

But if there is a failure of monsoon as the season progresses, the requirement for drought relief work will go up and it is in this context that the Agriculture Minister, Mr Sharad Pawar, maintained, "if there is a need we will not hesitate to import wheat".

But traders, scenting a killing in this opportunity, are warning the Government to stem rising wheat prices through imports. The traders are missing the point that the Government has ample stocks to distribute for its public work programmes as also the PDS commitments, which put together amount to 170-175 lakh tonnes for 12 months.

Even in rice, for instance, the entire procurement last year was 228 lakh tonnes. This year, with another quarter to go before the marketing year is over, the Government machinery has procured 224 lakh tonnes, with another 10-12 lakh tonnes being lined up for the remaining three months.

"So, if I have a slightly less stocks in wheat and more in rice, there is not much of a problem for me," says Mr Tuteja because, according to him, the PDS schemes, as also the other food-for-work programmes, have a mix of grains with inbuilt flexibility.

So, the impression gaining ground, that wheat procurement has slowed down and that the Government might perforce have to resort to import to fill the shortfall is not correct, as the Government machinery has enough stocks of wheat to last till the next season begins and has the additional flexibility of using the rice available with it to meet the requirements under its social obligation schemes.

The farmers are unwilling to part with their wheat produce because they find the price they get elsewhere a shade better than the MSP.

It is time that what is purely a market decision is left to the farmers, and not muddled by the trading lobby — domestic and multinational — which is looking for the slightest reason to make a quick buck at the expense of the farmers, who are fighting a losing battle against subsidised grains flooding the global market and distorting the terms of trade against their favour.

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