The Hindu Business Line : Flawed policy on wheat imports

The government’s failure to procure wheat means that it failed to arrest the decline in public stocks, which dwindled dramatically during the past few years.

Dilip Kumar Roy

In a report titled “The Extent of Chronic Hunger and Malnutrition in India”, Jean Ziegler has pointed out that India has the largest number of undernourished people in the world and one of the highest levels of child malnutrition. The wheat import plan of the Central government during the current year has to be seen in this context.

A few years ago, the Central government had nearly 60 million tonnes of food-grain reserves. A substantial quantity was even exported to reduce the cost of maintaining stocks.

Now the Centre is planning to import wheat to ensure food security by maintaining adequate stocks and supplying the public distribution system.

Against this paradox, here is a look at irrefutable facts:

Between 2000-01 and 2004-05, 29.9 million tonnes of food-grains under government control were exported at a heavy subsidy, estimated at Rs 14,135 crore. The export price was considerably below the minimum support price (MSP).

The beneficiaries were foreign agricultural trading giants and domestic trading firms who bought the grain for export.

Huge quantities of grains, almost 14.7 million tonnes, disappeared between 2001 and 2003 from the Food Corporation of India (FCI) godowns.

There has been a deliberate under-procurement in April-May 2005 and 2006, despite the increased requirement of the public distribution system, welfare schemes, and the food-for-work programme; the Central Government was aware in April 2005 that it needed at least 18.5 million tonnes of wheat the following year. Nevertheless, it procured only 14.7 million tonnes of the cereal in April-May 2005.

Beyond wheat and paddy: The government has adopted a policy of keeping the MSP low to reduce food procurement.

The Economic Survey states that the government deliberately restrained the increase in MSP. In effect, the government seems to want farmers to reduce grain production and switch to horticulture, floriculture, oilseeds and vegetables.

With the removal of import restrictions under the World Trade Organisation, Indian farmers were, in fact, asked to produce less food-grains, resulting in increased dependence on imports.

This coincided with the announcement of the Rs 15,000 crore National Horticulture Mission, underlining a new direction the government wanted farmers to take.

Besides, there has been a reduction of wheat allocation to the States, supply of coarse grains instead of wheat, removal of food-grains in employment schemes as part of wage payments, and decrease in the quots for drought-affected are as.

The virtual freezing of the MSP was, however, not enough to depress procurement to the extent the Centre expected.

Procurement in 2006

The fiasco of wheat procurement in April-May 2006 was, similarly, entirely predictable. The Food Corporation of India (FCI) and State government agencies stepped back from procurement operations and large, private and multinational corporations bought significant quantities of wheat. So did the Australian Wheat Board.

The government’s failure to procure grain means it failed to arrest the decline in public stocks, which dwindled dramatically during the past few years. It is being claimed that the entry of private trade benefited farmers because they got a better price and the imported wheat would help build a buffer stock.

Over the years, there has been pressure on the government to liberalise ‘marketing operations’ in agriculture. The primary demand has been to allow private trade a free hand. Of course, private trade realised it could not have a free run without the withdrawal of the public procurement agencies.

In the last few years, Indian wheat output has remained more or less stagnant at 70-72 million tonnes, falling from a peak level of 76 million tonnes in 2000-01. Between 2001-02 and 2005-06, there was a 10 percentage-point decline in wheat procurement.

Grain imports

Importing grain is always an emotive issue. In India, it brings to memory the humiliating terms under which the country imported wheat from the US 40 years ago. Moreover, we have seen that grain imports are seen as against the interests of Indian farmers.

The government’s decision to import wheat must be seen in terms of what it has or has not done to ensure food security. The criticism is that the government’s failure to procure wheat has allowed private trade to make unprecedented purchases in the major wheat-growing areas in northern India.

The achievement of environmentally, economically and socially sustainable food security or ‘food for all and forever’ must be at the top of a national common minimum programme.

Imports or exports of food-grains may be necessary from time to time, but the bottom-line of import-export policy must be the livelihood security of both the farm and non-farm populations of rural India.

(The author is a Senior Under-Secretary in the Department of Agriculture and Cooperation, Ministry of Agriculture, New Delhi. The views expressed are personal.)