The Hindu Business Line : Wheat policy needs re-sowing

A major cause for concern is the continuing stagnancy in wheat output in recent years even as demand soars. Urgently needed are non-price and non-trade initiatives to strengthen agriculture, and enable growers to reap real benefit, says G. CHANDRASHEKHAR.

THE SOLUTION to raising wheat yields lies in the grains of a good policy.

The one big positive factor about the Indian foodgrains scenario, in general, and wheat, in particular, is the demand side. Driven by income growth and demographic pressure, there has been a robust expansion in the demand for wheat. Changing food habits create additional demand. For instance, South India has emerged the fastest growing wheat consuming region in the country though the fine cereal is not cultivated there and has to be moved from the North.

The demand for essential food products is largely price inelastic; yet, at higher prices there will be some demand compression and substitution with cheaper alternatives, especially among the low-income groups. In the case of wheat, the big advantage is the rising income levels in the country, especially among a third of the population engaged in the manufacturing and services sectors.

Given the existing low level of per capita consumption, every rise in income would first translate into higher demand for essential food items, before stabilising. Therefore, demand conditions can be expected to remain robust over the next 10-15 years.

Stagnating Output

A major cause for concern is the continuing stagnancy in wheat output in recent years. Annual production targets have been missed regularly, at times by a large margin. The output is flattening, the averages for the last six years being less than 72 million tonnes. Critically, acreage, yield and output have all more or less hit a plateau in three major States — Punjab, Haryana and Uttar Pradesh. Worse, continued grain mono-cropping (rice-wheat-rice cycle) in the frontline States is seen as threatening the environment. An ecological disaster is waiting to happen. The water-table has declined to alarming levels and soil health has deteriorated in the absence of crop rotation.

Tightening Supplies

The growing demand and the near-stagnant production for years have resulted in a demand-supply mismatch and a tightening of availability. As a result, wheat imports have become a reality since 2006. Imports are likely to continue into the foreseeable future. A measure of the widening demand-supply mismatch is provided by the fact that net availability of grains, including wheat, today is lower than it was 10 years ago. Grains are staple food for a vast majority of the population. Any suggestion that consumers are migrating to other foods is misleading and designed to mask the failure on the grains production front. Rising wheat prices hit the poor the hardest. There is a skew in consumption, with the per capita availability for the poor rather low.

Food Security

Is the country's food security threatened? May not exactly be, today; but if the demand-supply trends are allowed to worsen, there is a risk of food security getting compromised. As important as food security is nutrition security. A large number of Indians are under-nourished. Women and children constitute a significant part of those suffering from malnutrition and under-nutrition. If adequate quantities of wholesome food are not delivered to the poor, nutrition insecurity can take a big toll on the economic activity of people.

Crop Diversification

Until a couple of years ago, it was fashionable for policymakers and others to talk of `crop diversification', that is, a shift of acreage away from the then so-called surplus grains to deficit oilseeds and pulses. There was a false assumption that production was in surplus as government agencies carried huge inventories of wheat and rice procured under the open-ended purchase programme. For various reasons, including government inaction, diversification of crops did not happen. Though, in retrospect, it must be stated that the fine cereals situation, in terms of availability and prices, would have been worse than it is at present.

There is absolutely no doubt that oilseeds and pulses — two crops in perennial deficit — need urgent attention and policy support for raising productivity and production. Yet, oilseeds and pulses promotion cannot be at the cost of fine cereals. With stagnating output of wheat and coarse cereals as also chronic deficit in pulses, a food crisis may well be emerging. The current concern over wheat production and prices must help focus attention on raising production and productivity of all cereals, including wheat.

Avert Ecological Disaster

Even as we argue against the desirability of sacrificing fine cereal area for legumes (oilseeds and pulses), it is imperative that crop rotation is practised in high-input States such as Punjab and Haryana. These frontline States are national assets, are critical for the nation's security and must be preserved. It is necessary to design a system of incentive and disincentive to ensure crop rotation in this region.

At the same time, policymakers and farm scientists must scout for other potential regions and examine the possibility of area and yield expansion in Uttar Pradesh, Rajasthan, Bihar and Madhya Pradesh.

Initiatives

Indian farmers face daunting challenges. There are internal and external challenges and constraints that affect profitability of farming. No wonder, the supply response to prices is limited. In other words, the ability of an average Indian farmer to increase output based on higher market prices is rather limited.

While remunerative prices to growers are absolutely essential, we need non-price and non-trade initiatives to strengthen agriculture, and enable growers to reap real benefit.The following initiatives are the way forward:

Strengthening input delivery system;

Improving agronomic practices;

Scientific water management and bringing additional area under irrigation quickly; and

Building rural infrastructure.

These must become the focus of attention of policymakers at the Centre and in the States. By their very nature, these tough measures are fraught with problems; yet, sooner we take these initiatives, the better.

Public investment in agriculture has declined in recent years. This alarming trend does not bode well for nearly 60 per cent of the population whose livelihood depends on farm-related activities.

A large part of the food subsidy bill is wastefully spent on wheat and rice buffer-stocking. This needs to be rationalised. Public investments in agriculture must be stepped up; and importantly, there must be accountability for delivery of outcomes.

It is conceivable that India will go the China way soon. Despite a large agricultural production base, China is a large importer of a variety of farm goods to meet the rising internal demand. India too is moving on to a high growth trajectory as a result of which the demand for food is bound to gallop.

Domestic output may trail demand

The endeavour should be that at least a part of the incremental demand is met through higher indigenous production. Per se, imports are not undesirable; but, to be sure, imports are at best a temporary option to tide over temporary shortages.

It is a facile option that should be resorted to only after all possibilities of raising domestic output have been exhausted. Because India is a growing economy characterised by domestic shortages, global suppliers perceive the country as a lucrative market.

It is instructive that developed economies support their agriculture with heavy subsidies. Despite commitment to the contrary, OECD farm subsidies have been rising. On wheat, the OECD Producer Subsidy is as high as $17-18 billion.

There is a lesson for India to learn from the manner in which OECD subsidies are distributed. A third of the total subsidy is spent on what are called `general services' that include farm research and extension, improving agronomy, crop quality, inspection and testing as also rural infrastructure.

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