Though tentative, the crop numbers are not encouraging and can have an adverse fallout.

Any hope that the kharif 2006 harvest would bring some relief to the beleaguered consumers and the Government, facing political pressure over shortage of essential food items and rising prices, was dashed by the recently-released first crop estimates. Although tentative, the Agriculture Ministry numbers portend bad news on the agriculture sector growth rate for fiscal 2006-07.

Far from improving, production of essential food crops has actually declined. This is sure to tighten supplies of some commodities such as maize and, of course, edible oils, unless augmented with imports. Among foodgrains, the output of rice and coarse cereals is down two million tonnes (m.t.) each, while the oilseeds production has taken a more severe beating, down by 3.0 m.t. (equivalent around one m.t. of vegetable oil). The sugarcane output estimate of 283 m.t. is no marked improvement over last year's 278 m.t. The silver lining is cotton, whose output has sustained at a high level. As is customary, these crop numbers may be revised over the next few months, but there is nothing to suggest such revision may be upward; it could be downward too.

New Delhi needs to take cognisance of the consequences the crop estimates surely entail. Food-related inflation could get worse, say, three months from now, though in the short-run (October-November) prices may soften because of harvest pressure. Arrangements to augment supplies through imports have to be made. The global agri-commodity market may not exactly be on fire, yet they are not buyer-friendly either. We have to pay a price for tardy growth in domestic farm output. It is time to seriously plan to maximise rabi crop production. The Minimum Support Price for the ensuing season should be announced without delay. Input availability has to be ensured. Overall, while the crop prospects in Rajasthan and Gujarat appear good, moisture deficiency in Punjab, Haryana and Uttar Pradesh could be a cause for concern.

In the emerging price situation it may be tempting for the Government to tighten market regulations by imposing further restrictions or continuing the existing ones (ban on exports, stock limits, etc). Instead of such knee-jerk reactions, the Government could initiate a dialogue with major commodity trade bodies to make a consensual approach to market regulation. The research and commercial intelligence capability of the policymakers need to be honed. Most important, the perception that it is the Centre's responsibility to ensure adequate availability of essential food items and control the price spiral is getting well entrenched. The Centre cannot get away by passing the responsibility on to State governments, many of which are simply unequal to the task. Restrictive measures imposed selectively by some State governments can actually worsen the problem by forcing the trade to shift to another less trade-unfriendly State. In the context of sluggish farm growth, a serious rethink on nationwide food management policy is called for.

Related Stories:
Farm Ministry's kharif estimate paints gloomy picture
Kharif grains, oilseed output may fall this year
Wheat output estimate pruned to 69.48 m tonnes

(This article was published in the Business Line print edition dated September 22, 2006)
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