The Hindu Business Line : Too little, too late

IT IS JUST as well that the Government has given up its ostrich-like attitude in deciding at last, to allow the import of five lakh tonnes of wheat to augment domestic supplies and contain rising prices. The fragile demand-supply fundamentals and role of speculative funds in the wheat market have been known for long. Prices have been steadily firming up the last several weeks. Ignoring cautionary signals the policy-makers chose to stick with the status quo, hoping that `somehow' they would tide over the situation without resort to imports. In the event, this may turn out to be a case oftoo little, too late.

Markets are unforgiving; indeed cruel. The earlier the policymakers recognise that the days of government influencing the market through official diktat or pep talks are over, the better. The forced decision reflects a rather casual approach to foodgrains management. A wheat exporting nation three years ago, we have now turned importer. The threat that we could become a net importer in the coming years is real because there is no evidence of a well thought-out long-term comprehensive strategy for foodgrains production, procurement, distribution and pricing. Recommendations of high-level expert committees are in cold storage.

The decision to import is too late for more than one reason. Farmers completed marketing of the last crop several months ago and received prices equal to the procurement price of Rs 640 a quintal, or a little more. Look where the market has gone since then — prices are close to Rs 1,000 a quintal, and more in south India. The consumer has been forced to cough up a huge premium for wheat; but no part of this premium goes to the deserving grower. Speculators (it is now fashionable to call them `investors') are laughing all the way to the bank. The deed is done. The Government's lethargy has robbed consumers, and not benefited growers. The earliest that the intended import can arrive is the latter half of March, by which time the season's first harvest in Gujarat will be underway. Until then, the country will have to make do with tightening stocks and firm open market prices.

Close to 50 lakh tonnes would be required over the next three months to meet the needs of public distribution system and welfare schemes, if the Government does not wish to compromise in any way. The next two months would also prove whether or not stocks said to be on the registers of Food Corporation of India (FCI) do really exist. Given the low inventory with public agencies and virtually zero opening stock for the new season, it will be a challenge to procure adequate quantities for 2006-07 because open market prices could rule above the procurement price of Rs 650 a quintal and farmers may not supply sufficient quantity to FCI. Obviously, further imports cannot be ruled out, a position the Government has admitted. The real challenge on the wheat front is yet to emerge. The weather in the next four weeks is crucial for the upcoming wheat crop, especially in the principal growing States of Punjab, Haryana and Uttar Pradesh. The country must consider itself fortunate if the output touches 74-75 million tonnes. The State Trading Corporation of India (STC) needs to exercise utmost caution in discharging its duty to import wheat and it must ensure that purchase decisions are taken transparently.