The Hindu Business Line : Wheat policy is all chaff

Poor planning has led to a drain on the exchequer by way of wheat imports. Unless a ‘grain centric’ farm policy is framed, we may lose our position as self-sufficient nation.

K. P. Prabhakaran Nair

In May, when Ajmer Singh Lakhowal, Chairman of the Punjab State Marketing Board and leader of the Bharath Kisan Union, prevented Punjab’s wheat farmers from selling their produce to New Delhi at an MSP (minimum support price) of Rs 850 a quintal, which the mandarins in New Delhi considered a “largesse”, it looked as though Mr Lakhowal was holding the nation to ransom on wheat procurement.

He argued that if the farmers waited until July, they could get at least Rs 1,140 a quintal (100 kg make a quintal and 10 quintals a tonne) and buttressed his arguments saying that when the Food Corporation of India (FCI) was set up in 1976, New Delhi offered an MSP of Rs 76 a quintal.

Successive governments have pampered the employee class, probably to build a vote bank; so while salaries scaled up seven-fold, the MSP increased just doubled. While input costs, primarily of fertilisers, soared because of the rising crude oil price and a directionless fertiliser policy, the MSP increased only marginally on a relative scale, making grain farming ever more burdensome.

And now, New Delhi is importing 5.11 lakh tonnes of wheat, whose landed cost would be Rs 1,315 a quintal; add about Rs 90 for handling and bagging, it would be Rs 1,400-plus a quintal. Had New Delhi listened to the prophetic words of Mr Lakhowal and offered an attractive price of at least Rs 1,000 a quintal in May when wheat arrivals were at their peak, FCI’s godowns, would have been brimming.

Now, it is the foreign suppliers who stand to gain substantially at the expense of Indian farmers. Does one need further proof for a thoughtless food policy?

Rs 17-crore loss

The Government will import 0.511 million tonnes at $ 318-329 a tonne paying about $70 a tonne ($260) more than the the price New Delhi had negotiated in April for one million tonnes. At that time, the price was considered “high”. But this wil now cost the country about $ 4 million. At the current dollar-rupee exchange rate, this is a drain of close to Rs 17 crore in less than two months.

With the spreading drought in Russia and Ukraine, and erratic weather in the US, global wheat suppliers jacked up wheat prices to a 11-year high on the Chicago Board of Trade over the past one month, leading India to spend a lot more on the commodity . But the emerging tightening position of global supply was known to New Delhi much earlier yet no proper planning was done.

Why no decision in time?

In 2006, 5.5 million tonnes of wheat was imported at an average price of $ 205 a tonne and it was expected that wheat yield would not be high this year.

The far more distressing issue is New Delhi not announcing an attractive price of not less than Rs 1,000 a quintal well before the onset of the sowing season so that farmers would have been enthused to go in for wheat on a large scale.

New Delhi often proclaims that it is the subsidy given by the US and the European Union that is throttling Indian agriculture. Yet, what has been done to safeguard the interests of wheat farmers than dangling some carrots?

India has clearly emerged a net wheat importer and global suppliers are taking advantage of the country’s critical situation,; food managers do not seem to learn from past mistakes. Even shippers are jacking up freight to harvest a windfall.

Move to agro-fuels

Can imports go on for ever? According to the UN, food prices will rise in the next 10 years, as twice as much sugarcane, maize and oilseed rape are grown for bio-fuel and people in developing countries such as India, China and Brazil start to switch to more of meat-based diets.

The move to agro-fuels, which can only marginally reduce global warming and reduce the US/EU dependence on fossil fuels, is being led by the US, Brazil, China and Europe. In 2006, more than a third of the maize crop went for ethanol production, a 48 per cent increase over 2005. China and Brazil grew the crop on more than 20 million hectares. The UN study says that this area could double in the next decade.

Despite a basic China policy not to reduce its total cultivable land under grains (69 per cent), its thirst for new energy sources will trigger the shift. When that happens, it will have far-reaching consequences on the food front, because land once meant for grain crops will be taken away for bio-fuel crops. If India also gets tempted to take this path, it would be suicidal.

While higher food prices are profitable for big farmers, they would threaten the economies of food-importing countries. This is where India needs to be vigilant. Higher food prices will also mean additional investment for livestock farmers, who must buy feed. A rush to energy crops is bound to propel industrial agriculture, while sustainable food production will fall. How should the country meet the emerging situation?

There is no gainsaying the fact that India is “self sufficient” in food. It is a sad commentary on the agricultural fraternity that the country is not producing grain in abundance to make domestically grown food cheap. The wheat import simply illustrates the supply-demand mismatch.

India’s farm policy must be “grain centric”. The pay out on wheat import could have been put to better use.

After all, we have a bulging forex reserve and India does not have to undergo the humiliation of the PL 480 food “aid” programme. No self respecting nation must live on imported food.

(The author, a former National Science Foundation Professor, Royal Society, Belgium, can be contacted at nair_kpp @yahoo.com)

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