The Hindu Business Line : Private gain at public expense?

The demand to allow private trade to import wheat free of any Customs duties is indeed intriguing. The private wheat trade could rewrite the country's agriculture transformation, from `ship-to-mouth' to food secure, albeit with a generous policy push.

But the net losers would be both the consumers and the producers, even as state agencies will be left demoralised. Wheat import by private trade also has the potential to disturb the food business, especially the farmers of Haryana and Punjab.

Private Profiteering

Public agencies and the buffer-stock have their origin in the profiteering indulged in by the private trade immediately after Independence. The country appears headed back to those days. The idea of allowing private players to import wheat has been around ever since the foodgrains trade was liberalised in 2001-02.

The plea of protecting the middle-class consumer interest sounds empty.

Wheat imbroglio

A set of assumptions underlying the "India Shining" model used in the Tenth Plan (TFYP 2002-07) provides the earliest explanation to the current wheat imbroglio.

The "exaggerated changes in the food consumption pattern of the population" appear to have ignored the dramatic deterioration in the household indebtedness; the worsening plight of rural households compared to their urban counterparts has now been empirically established.

The Tenth Plan merely reproduced the US version of the Theory of Competition that encouraged monopsony in wheat trade. This theory was operationalised by diffusing competitive regulatory practices set under the Essential Commodities Act (ECA), 1955.

The ECA is a mere manifestation of commitments of economic growth with social justice, in general, and related Constitutional guarantee enshrined in Articles 301-307, Article 19 (5) as well as Article 19 (6) (ii), in particular.

When the executive order GSR 104(E) dated February 15, 2002 under ECA's Section 3 — titled the "Removal (of licensing requirement, stock limits and movement restrictions) on Specified Foodstuffs" — came into operation, all powers delegated to the State governments to ensure food security were withdrawn.

The order was revised vide GSR 490(E) dated June 16, 2003. First, the power to issue levy rice order was restored to the States concerned. Second, the definition of "dealers" was further expanded to include exporters as well as importers of food products.

Third, `sugar' as a commodity was kept out of the February 15, 2002 order. This effectively meant that rice and sugar continued to be essential commodities while wheat was not.

Fourth, the public agencies were not allowed free and level playing field. Fifth, no market fees or any other charges are payable by the private dealers procuring wheat directly from the farmers.

A part of the answer also lies in the political economy. For, a big constituency of such private players as bakeries, biscuit manufacturers and roller flour mills has to be protected.

The February 2002 and the June 2003 orders must be immediately amended to redeem the wheat market. The financing and storage practices adopted by the private and MNCs-appointed dealers must be probed and penalised if they are found adopting anti-competitive practices.

Unhealthy Precedence

The quality and quarantine stipulations are meant to protect the health of consumers. Will the private trade import ensure the safety aspects of the imports? There are two moves that will aid private trade. First, the Food Safety and Standards Bill, 2006, introduced for the third time in Parliament on May 22.

Second, the Agricultural and Processed Food Products Export Development Authority (APEDA) has come out with a series of quality assurance protocol for food exports. Both these moves have unjustifiably transferred a heavy burden on the poor farmers.

(The author is Chair, Faculty of Economics and Development Planning, HIPA, Gurgaon. The views are personal.)