Commodities

Promote barter trade for surplus commodities

G. CHANDRASHEKHAR | Updated on April 26, 2021

Focus on barter trade for wheat, sugar export

Saddled with a burdensome inventory of wheat and sugar, New Delhi is struggling to meaningfully liquidate the stocks while causing the least financial damage. Several options, including higher domestic consumption, diversion for bio-fuel and export to overseas markets, are under consideration.

As part of this, the government has decided to distribute free rations of wheat to 80 crore vulnerable families during May and June. This is a welcome step as it comes at a time when the nation is facing the second wave of Covid-19 infections and reverse migration of people from cities to their villages has commenced.

Free ration of wheat is likely to deliver political gains. As for sugar, exports have been incentivised (euphemism for subsidised). But such decisions – free-rations and subsidised export - are knee-jerk reactions to an avoidable awkward situation and do not make for a consistent and rational food trade policy.

This is primarily because the government does not have a comprehensive annual plan to broadly sync production and consumption of agricultural goods, especially food commodities. Overall, our food management leaves much to be desired. Because there is no synchronised production and consumption plan, there is no steadiness in export and import trade in agricultural commodities.

Be that as it may, if we assume that ‘business as usual’ will continue – meaning we will have annual surpluses in wheat and sugar while facing shortages in others like edible oil – then the sensible option of promoting export through barter trade or counter-trade should be explored. India has to exploit its ‘import power’ as well as leverage its trade agreements; but we don’t seem to be pursuing this.

Take Indonesia for instance. India’s merchandise trade deficit with Indonesia which supplies palm oil, coal and lumber is $10-12 billion. Indonesia’s annual import of wheat and wheat products is as high as 10.5 million tonnes and annual import of sugar at 5 ml t.

India’s share in the Indonesian market for wheat and sugar is limited. Why are we not leveraging our import power to maximise export of surplus products such as wheat and sugar that we can offer? In any case, Indonesia needs these products and imports from other suppliers to meet its domestic needs.

It devolves on the Indian government and its various ministries, including Commerce, Finance and Foreign Affairs, to work in tandem to ensure the trade deficit with Indonesia is reduced. A barter deal with Indonesia would be in order.

Another example is Saudi Arabia with which we run a merchandise trade deficit of $20 billion as we import much needed energy products, mainly crude oil. India’s efforts to reduce this trade deficit are unclear.

To be sure, Saudi Arabia imports 3.0 ml t of wheat and 1.5 ml t of sugar annually from various origins. India should be able to meet that market’s entire requirement of wheat and sugar. Again, government efforts to reduce the merchandise trade deficit with Saudi Arabia are not known.

Bangladesh is another market where Indian wheat and sugar can go. Our neighbour imports 6.5 ml t of wheat, 2.5 ml t of sugar and 1.5 ml t of pulses annually. We should be able to supply a substantial part of the import requirement. The bilateral relationship should be leveraged.

Malaysia from where we import palm oil needs 2.0 ml t of sugar annually, and Myanmar from where we import pulses needs one ml t of sugar. These are but a few examples.

Barter trade or counter-trade is not a new idea; it is decades old. Yet, the Indian government does not demonstrate adequate enthusiasm and will to boost our exports to these markets as barter deal.

(The author is a policy commentator and agribusiness specialist. Views are personal)

Published on April 25, 2021

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