The Hindu Business Line : Farm policy flurries

Going by the signals emanating from New Delhi, it seems no more a question of ‘if’, but ‘how soon’ general elections will be announced. And, as a consequence, inflation control has raced to the top of the government’s priority list. In a series of decisions designed to support both farmers and consumers, the government has raised the minimum support price (MSP) for rabi crops such as wheat, pulses and oilseeds, extended sops to the sugar sect or and banned the export of sensitive food products such as non-basmati rice and wheat flour. Happily, the announcement has come well before planting time, but the decision needs to be disseminated among growers across the country, so that procurement can keep pace with the output. Globally, grains and oilseeds markets have been on fire for some time now because of a combination of bad weather (in Australia, for instance), competition among various crops leading to lower acreage for some (in the US), and large-scale diversion of traditional products (corn, wheat, vegetable oil) for biofuels in the western world. As the domestic market is no more insulated from global influences, international trends are reflected in prices here, with grain and oilseed prices rising to newer highs.

No doubt, at 33 per cent, wheat has seen an unprecedented hike in MSP to a record Rs 1,000 a quintal for the ensuing season. Rabi pulses (gram and lentil) prices are higher by 10-11 per cent, while rapeseed/mustard is up 5 per cent to Rs 1,800 a quintal. But will the growers respond with higher production? On current reckoning, it seems less likely that wheat output in April 2008 will even reach, leave alone exceed, the 75 million tonnes of 2007 or, for that matter, that pulses and oilseeds output will expand sharply. Punjab, Haryana, West Uttar Pradesh and parts of Rajasthan and Madhya Pradesh show soil moisture deficiency. A good round of winter rains alone can improve the crop prospects. Acreage shifts are also not ruled out.

Despite price concerns, the ban on export of non-basmati rice is unfortunate, and reflects excessive caution by the government. The ban would deny paddy growers higher market prices. At the same time, there is no guarantee that internally prices will not spike. An embargo on coarse varieties may be justified on considerations of domestic demand and prices; but stoppage of premium grades, that command attractive export prices, is uncalled for. The ban needs to be reviewed. Superfine varieties should be allowed, if need be with a minimum export price condition. To some extent it will help repair the damage caused in the international market by sudden clamp-down on exports of various commodities.

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