The Hindu Business Line : Incentivise crop diversification

TWO AREAS THAT need attention in the coming Budget are crop diversification and food subsidy. Far from being mutually exclusive, these two are closely related. Improved foodgrains management (production and inventory) is the key to reducing the food subsidy. It is no secret that attractive minimum support prices (MSP) year after year and the policy of open-ended procurement have encouraged farmers, especially in some irrigated regions, to raise cereal crops and sell their produce to the government rather than in the open market. Quite apart from the adverse ecological effects of grain mono-cropping (rice-wheat-rice cycle, season after season, in such frontline States as Punjab and Haryana), excessive build up of public stocks has resulted in huge carrying cost and raised the food subsidy burden to an astronomical Rs 25,000 crore.

It is becoming increasingly evident that providing food security through buffer stock operations is fiscally unsustainable. Though politically challenging, one sure way of ensuring that the Food Corporation of India does not stock unconscionable levels of grains is to consider a cap on procurement. A maximum stock norm, similar to that on the minimum level, is necessary so that grain purchases by the government are kept at manageable levels. If such a move necessitates a redefining of the procurement policy so be it. A ceiling on procurement should be announced well before the start of the planting season together with the MSP so that farmers can take a decision on what to plant and on how much area. Given the prospects of the wheat crop in the making, prices are expected to remain firm — an opportune time to consider seriously a cap on procurement and announce a decision for the next crop to be planted later in the year.

The policy-makers have no doubt recognised the need for shift of acreage from fine cereals (wheat and paddy), in which the country is largely self-sufficient, to produce that are in short supply. "The time has come to encourage our farmers to diversify into areas such as horticulture, floriculture and oilseeds," the Finance Minister had said last July while presenting the new Government's first Budget. There is now neither the motivation nor the compulsion for grain farmers to shift to other crops. A clear signal must be sent out that the Government can no more afford to be the first, last and often the only buyer of wheat and rice. This would encourage, indeed pressure, growers to allot at least a part of the land currently under fine cereals to other crops such as oilseeds and pulses that are in short supply.

Despite being the world's largest producer and consumer, India is the world's largest importer of pulses. In edible oils, it is second, after China. Instead of a sharp increase in the oilseeds MSP which invariably raises edible oil prices, creating conditions for a partial shift of, say, three million hectares of irrigated land from fine cereals to oilseeds would increase indigenous oilseeds supply by over three million tonnes, with such concomitant benefits as utilisation of idle processing capacity, reduction in import dependence, and increased animal feed supplies. If need be, such a shift should be incentivised.

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