The Hindu Business Line : Taking stock of wheat, sugar

THE LATEST ESTIMATES suggest that the wheat crop being harvested would be down three million tonnes to 73 million tonnes from the initial forecast of 76 million tonnes. This is attributed to lower yields in late-sown areas caused by higher-than-normal temperatures during the critical maturation stage of the crop last month. As a result, procurement is likely to be less than the expected 20 million tonnes. Output shortfall coupled with anticipated lower procurement is beginning to cause some concern, aggravated by the drop in government stocks over the last two years. Apprehensions of a shortage of this fine cereal are unwarranted on current reckoning. Assuming that the final harvested quantity would not be markedly lower than 73 million tonnes, it is still higher than the 65 million tonnes of last season. Looking at the pace of arrivals and purchases so far (13.5 million tonnes bought as of April 26), the final figure is sure to exceed last year's procurement of 15.8 million tonnes and possibly reach 16.5-17.5 million tonnes this season. Though permitted to buy directly, private trade has not shown much interest in wheat procurement, as a result of which the government is buying up most of what is arriving at marketing yards at the support price of Rs 6,300 a tonne.

Together with the opening stock of some 6.5 million tonnes (higher than the minimum stock norm of 4 million tonnes as of April 1), the availability with the government and in the open market should be comfortable. The only point of regret is that wheat exports may take some beating. Allocation for export that was discontinued last July is unlikely to be revived anytime soon. In any case it is a cruel joke to subsidise grain exports when admittedly several millions are unable to access food. The open market will have to be monitored for possible price spikes. If need be, corrective action should be initiated in the form of intervention using buffer-stocks, as demand is likely to be robust in the coming months because of the welcome rise in incomes, especially in the rural areas. Under no circumstances should the allocation for welfare schemes be curtailed. The new government has its job cut out.

With a precarious demand-supply balance, the sugar market is in the grip of speculative action. Price spikes on the back of a reduction in production this year have encouraged the industry and trade to look at imports as a serious possibility. Lobbying is already on for change of input-output norms and conditions associated with duty-free import of raw sugar. But there is a silver lining to the sugar situation: Reduced inventory burden on mills and the emergence of conditions appropriate for total decontrol. The Secretary to the Union Ministry of Food and Public Distribution, Mr S. K. Tuteja, has, rightly, dismissed concerns of an impending shortage of foodgrains and sugar, stating that existing stocks were more than adequate to meet consumption needs. But he must remember that the market always moves on the basis of expectation of changes rather than on present demand-supply fundamentals. A close watch on the market and a readiness to intervene, including through imports, are necessary.

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