When it comes to augmenting food availability and containing food inflation, the government finds itself on the back-foot , resulting in knee-jerk policy interventions.

The interventions take the form of outright ban/suspension of traditional agricultural commodity exports, imposition of export duty or minimum export price, or suspension of derivatives trading for an extended period of time that deprives market participants a tool for price risk management in a volatile market.

A major reason for the lack of proactive and timely initiatives could possibly be the lack of commercial intelligence and market price outlook within policymaking circles.

Interaction with bureaucrats and others suggest a palpable lack of knowledge about global and domestic market dynamics as well as ground realities. Inability to read market signals often makes them nervous. Often, officials issue threats of penal action against distributive trade and the processing industry.

Generally, the government’s policy interventions are based on production data, but the quality of such data is suspect. Take the last three seasons — rabi harvest 2021-222, kharif harvest 2022-23 and rabi harvest 2022-23. Whether it is rice, wheat, pulses, oilseeds or cotton, the government’s production numbers are unrealistic or overstated. Whether the overestimation of crop size was by accident or design is hard to tell. Independent researchers, large user industry and trading houses do not go by government data. Private estimates point to much lower production — by 10- 20 per cent.

Crop shortage

If the government’s production data for rice, wheat and pulses were realistic, the country shouldn’t be facing shortage of these crops. For two years in a row, wheat production is close to 100 million tonnes as per private estimates, but the government steadfastly sticks to far higher numbers. Procurement of wheat by Food Corporation of India has fallen well short of the target. Tight supply and escalating prices have forced a ban on wheat export since May 2022.

The rice situation is somewhat better, but no less worrisome. Rice harvest in the kharif season 2022-23 is widely perceived to be far lower — by at least 10 per cent — than the government’s estimate of 110 million tonnes. Major growing areas in the eastern parts of the country faced deficient rainfall last year and, therefore, lower acreage and yields. Non-basmati rice exports are restricted.

The country is coming towards the end of the South-West monsoon. Several meteorological subdivisions have reported a cumulative deficit of about 30 per cent in rainfall as of end-August. Eastern Uttar Pradesh, Bihar, Jharkhand, Gangetic West Bengal, Rayalaseema, south interior Karnataka are all in deficient category.

Pulses are another example of clear overestimation of production. In kharif 2022-23, the first advance estimate of the government was an unrealistic 9.3 million tonnes which independent researchers and market participants placed at 8.4 million tonnes. Bad weather during harvest inflicted more damage. Eventually, the government had to pare down its estimate to 7.8 million tonnes.

Even in case of soyabean in the kharif season and rapeseed-mustard in the rabi season, the official crop estimates are in excess of private estimates.

The government may have a lot of data, but that by itself does not help. The quality and interpretation of data are important. Agribusiness has reached a stage where no one can ‘talk the market up or down’.

To be sure, in the last two years, a combination of geopolitical challenges and weather aberrations has distorted the global and domestic agricultural commodity sector. There’s a need to build greater resilience in our agriculture and agribusiness. This calls for greater research and interaction with domain experts.

Given land constraints, water shortage and climate change, farming in our country will continue to face challenges. We need to build some predictability in our trade and tariff policies at a time when the Global South is facing food security challenges.

The writer is a policy commentator and agribusiness specialist. Views are personal

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