The Hindu Business Line : Uncertain on agriculture

THAT THE AGRICULTURE Ministry's initial optimism about Rabi (summer) crop prospects was somewhat exaggerated or misplaced is clear with the release of the second advance estimate of production for the 2004-05 season. Stagnant fine cereals (rice and wheat) production and a decline in the pulses and coarse cereals output means the overall production will fall this year. Indeed, as the weather over the next eight weeks would be crucial for the standing wheat crop, the threat of a further decline in output still looms. Rapeseed/mustard production estimate is believed to be overstated. With the Indian agri-commodity market slowly integrating with the global market, soft international prices of many farm goods this season, following significant increases in wheat, corn (maize), cotton, soyabean and palm oil production, are bound to exert a downward pressure on domestic prices. Forward prices of rapeseed/mustard (Rs 1,500 a quintal, considerably lower than the minimum support price — MSP — of Rs 1,700) are a good indication of the shape of things to come.

The Government has the unenviable task of handling the conflicting interests of, on the one hand, primary producers who want higher returns for their produce, and, on the other, consumers who despise inflation. As production trails consumption growth, the threat of a price spurt in essential food commodities such as sugar, wheat and pulses, is very real, especially after May. A firm crude oil market is another factor to reckon with. It is premature to take a view on the next monsoon. The forecast and the onset of the South-West monsoon would be critical as the price situation can turn potentially explosive in case of an aberration. Herein lies the challenge for the Government — to ensure uninterrupted supplies of essentials, check speculative tendencies and rein-in prices until the next Kharif harvest, which is eight months away. The temptation to bring back controls should be nipped. Exercising the option of allowing liberal imports, even with some duty cuts, would be facile. Rather than being the first, it should be the last resort.

It is time to strengthen the public distribution system (PDS). State governments have a critical role to play in ensuring delivery of grains and other essential commodities, especially to vulnerable sections. The Government must consider reviving supply of edible oil (refined palmolein) through the PDS, a practice discontinued for no valid reason four years ago. The forward prices of wheat at the futures exchange are firm and above the MSP of Rs 640 a quintal. This can dissuade farmers from selling grain to the Food Corporation of India (FCI). Foodgrains management assumes heightened importance. For all practical purposes, subsidised sale of rice and wheat through the FCI can be ruled out at least until the next crop year. The uninspiring farm performance is a cause for some concern. Hopefully the Finance Minister will take cognisance of the realities. Agriculture is widely expected to be the focus area of the forthcoming Union Budget. Proposals to strengthen this sector and pave way for sustained growth in production are required.

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