The Hindu Business Line : Arrest the drift

A TOUGH CHALLENGE confronting policymakers this year on the farm front is the mixed trend in the production of commercial crops, sugarcane, oilseeds and cotton, each of which is facing a unique problem that is seen as impacting, in some way or other, both primary producers and consumers. This is even overshadowing the imminent deceleration in the overall farm output growth as to some extent this was only to be expected considering the high base set last year.

With cane output at one of the lowest levels in recent years and consequently, sugar production dipping rather steeply, open market sugar prices are firming up, notwithstanding the Government's assurance of adequate stocks. There are incipient signs of a market flare-up in 2005 first quarter. The situation is explosive and far from being consumer-friendly. From an exporter until last year, India has turned into a net importer of sugar. In the case of oilseeds, chronic domestic shortages have become so much the norm that the Government seems to have fatalistically accepted the inevitability of massive imports of edible oils. The projected import requirement for 2004-05 is over 50 lakh tonnes (or over 40 per cent of the total demand), up from 44 lakh tonnes the previous year. On the other hand, oilmeal exports, especially soyabean extraction, are expected to decline following a record global crop. Heavy subsidies and aggressive marketing by major exporters appear to be crimping India's export prospects.

Following a bumper crop, cotton is in the limelight, but there is little to cheer about. Massive arrivals across the country are depressing prices. Growers' interests are compromised. Processors — ginners and textile mills — have not shown enough enthusiasm to support prices by building inventory, raising suspicion that they are hoping for a further fall in farm-gate rates. Procurement by the Maharashtra Government at unrealistic prices appear to be distorting the market. To add to the woes, international cotton prices have declined precipitously on record global production. Exports would contribute in some measure to stabilising weak domestic prices, but someone must absorb the difference between relatively high domestic prices and low export prices. In other words, exports have to be subsidised.

It is not clear if New Delhi has taken cognisance of the ground realities in these commercially important commodities. While it is important that current problems are addressed expeditiously, it is critical that adequate policy support with a long-term perspective is extended for production stabilisation, quality improvement, appropriate pricing and creation of genuine export surplus. Huge investments are needed to strengthen the production base and insulate producers from the vagaries of the market. A mere hike in the minimum support price unrelated to market conditions is unlikely to deliver lasting benefits. There is no evidence of a strategic plan to address the structural issues of crop production or processing and marketing. Mr Sharad Pawar holds the key portfolio of Agriculture and Consumer Affairs, Food and Public Distribution that touches almost everyone someway or other. He must act to arrest the drift that has set in the three commodity sectors. Mr Pawar has his job cut out.

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