The Hindu Business Line : Govt should maximise kharif crop output

Mumbai, April 25 If one goes by the screaming headlines in various newspapers that proclaim the country is set to harvest record agricultural crops this year, one can be pardoned for imagining that we must indeed be self-sufficient in food. Far from it and ironically, we have today in our country the spectre of rising food prices, tightening availability and growing dependence on imports.

Total foodgrains production in 2007-08 (after kharif 2007 in September/October 2007, currently, rabi 2008 crops are under harvest) is an estimated 227.3 million tonnes (mt), a new record, and up by 10 mt from the previous year.

According to the Ministry of Agriculture, all foodgrains crops – rice, wheat, coarse cereals and pulses – have registered sharp expansion and output has reached all-time high. While rice output is placed at 95.7 mt, wheat currently under harvest is at a new high of 76.8 mt.

With all the restrictions on private trade in wheat purchase, there should be little worry over the Food Corporation of India mopping up most of the market arrivals and meeting and possibly exceeding the 15 mt procurement target.

Coarse cereals production at an estimated 39.7 mt (of which maize was a record 18.5 mt) and pulses at 15.2 mt also meant new highs. No wonder, the country has been exporting maize with limited impact on domestic prices.

Maize exports may breach the 2-mt-mark.Commercial crops oilseeds (26.2 mt) and cotton (30 million bales) have performed well too, while sugarcane output is at a respectable 344 mt.

With this kind of record numbers one should have expected open market prices to have crashed or at least remained largely consumer friendly; but it is not to be. Combined with high fuel prices, rising food prices have resulted in inflationary conditions, prompting the government to take precipitate action.

The impressive crop production numbers notwithstanding, the trade and tariff policy is in a shambles. Export of all varieties of rice (except basmati) is banned, while basmati is allowed at a steeply hiked minimum export price.

Wheat exports stand prohibited; so are pulses exports. Export of edible oil is banned too.

So, we have an anomalous situation of record crops coexisting with controls and restrictions that remind one of the pre-liberalisation period.

On the other hand, imports have been opened up to augment supplies. Wheat, pulses, maize and crude edible oils are all allowed duty-free. India continues to import large quantities of edible oils and pulses, estimated at 50 lakh tonnes and 25 lakh tonnes respectively.

Very clearly, the big upsurge in food crops has not had a significant dent on high prices of food. This is because even the record crops are not sufficient to meet rising domestic demand. Also, speculative tendencies have been fanned in the name of market liberalisation.

So, India will be forced to continue to import foods of mass consumption such as edible oil and pulses. Prices of many farm commodities (wheat, corn, oilseeds) have been high in the international market. This has had a rub-off effect on domestic prices too.

While it is heartening that the country is harvesting a record crop, it is important to ensure that the benefit such big harvest reaches the largest number of people. Food has to be made both accessible and affordable to the poor. This is exactly where the government comes in.

We need policies that ensure the poor are not completely at the mercy of the markets.

Markets usually perform well in glut situations; but in times of shortage markets usually turn oppressive and unrelenting. It is now time to look ahead – at the next crop due by September 2008.

One positive aspect is the prediction of a normal southwest monsoon. The Union government together with all State Governments must strain every nerve to maximise kharif 2008 crop output.

From 2003, the country has had five successive years of normal rainfall; yet, we failed to leverage the bounty. Food output has been stagnant and shortages are looming, even as demand growth has clearly outstripped supply growth.

Given the global commodity market situation and price outlook, we perhaps cannot afford another sluggish agricultural growth year in 2008-09.

Hopefully, policymakers in New Delhi and elsewhere are alive to the situation.