The Hindu Business Line : Panic in wheat

While wheat consumers will be hit hard, most small farmers are unlikely to benefit from the super bonus simply because their crop often is pre-sold to intermediaries.

What can one expect from a government confronted with a heady combination of too much politics, too little economics, and a losing fight against inflation? It is panic reigning supreme in the corridors of power in New Delhi. The declaration of an unprecedented Rs 100 per quintal bonus to wheat growers this season shows the government is completely on the defensive, unwilling to take chances with the volume of wheat procurement and doubly keen to signal its pro-farmer stance. Duty-free imports have been extended till the year-end, while large corporate wheat buyers have been `persuaded' to keep off the market at peak harvest. Ironically the seemingly positive moves could be counter-productive.

Although wheat output is unlikely to hit the target of 75.5 million tonnes, it could well be between 2 million and 3 million tonnes more than last year's 69.5 million tonnes. But with these knee-jerk moves, the government has willy-nilly sent out a message that all is not well with the current wheat crop and that, without sops, it cannot procure the targeted 15 million tonnes. This will do little to contain speculative tendencies. Worse, the higher procurement price is sure to make wheat more expensive and add to the overall inflation. With the minimum support price at Rs 850 a quintal, the season's opening price at the marketing yards would be not less than Rs 950 a quintal, inclusive of taxes. Add a carrying cost of Rs 20 a quintal per month, and one can imagine where the market will be towards the end of the year. While consumers will be hit hard, most small farmers are unlikely to benefit simply because their crop often is pre-sold to intermediaries, who will walk away with the bonus. Assuming that Food Corporation of India manages to procure 15 million tonnes, and that the government is required to sell wheat in the open market after August-September at subsidised rates to rein in prices, the country may well end up with an additional food subsidy of Rs 8,500 crore, including the Rs 3,500 crore spent on the import of 3 million tonnes.

So much for the commitment to fiscal responsibility and subsidy reduction. Yet amid the desperate attempts to `somehow' tide over the crisis, there has been not a whisper about any concrete plan to raise wheat production and productivity. The two frontline producing states, Punjab and Haryana, are instead racing towards an ecological disaster with their cycle of rice-wheat-rice crops squeezing the soil of nutrients and depleting the aquifers. The much talked-about crop diversification is on the backburner. The government owes the nation an honest answer to this sorry mess.

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