The government’s decision to scrap import duty on wheat could not have come at a worse time. Farmers are struggling to deal with demonetisation, with prices crashing due to sudden demand compression. Allowing private traders—including multinationals such as Cargill, Bunge, Lois Dreyfus — to bring in cheap wheat from the world market duty-free will compound their woes.

Following demonetisation, there have been reports of cash-starved wheat farmers resorting to distress sale to buy seeds and fertilisers for the ongoing rabi season. Farmers have been forced to sell paddy at prices as low as ₹700-800 per quintal, against the MSP of ₹1,540, according to CPI (M) leader Sitaram Yechury. In Punjab, farmers are depending on arhtiyas or grain commission agents to supply them with fertiliser and seeds on credit. This could include finance, which has to be paid back with their earnings from the rabi crop. Allowing wheat from countries like Australia to come into the domestic market duty-free could lead to a considerable drop in wheat prices in the open market. This was pointed out by agriculture ministry officials in an inter-ministerial group meeting in October, when the consumer affairs Ministry had proposed scrapping import duty on wheat.

The decision to lower duties to zero has been taken despite the fact that there has been no downward revision in the government’s estimates of a bumper crop in the 2015-16 — pegged at 93.5 million tonnes, compared to 86 million tonnes the previous year. Nor is the government expecting a shortfall in production in 2016-17. It claims rabi sowing is proceeding well. The reason cited by the government — price rise —is not convincing, as prices have not risen dramatically in the domestic market.

The government could have carried out a realistic assessment of wheat availability before allowing duty-free imports. Better inter-ministerial consultations should precede such moves. Astute, rather than knee-jerk, decisions are called for.

Deputy Editor

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