Express View on stock limits on wheat: Going backwards

Indian farmers, according to the Agriculture Ministry, harvested a record 112.7 million tonnes (mt) of wheat in 2022-23. Government agencies bought only 26.2 mt of that crop, as against the all-time-high procurement of 43.3 mt two years ago. Together with the ban on wheat exports since May 2022, these should have translated into higher open market supplies, exerting downward pressure on prices. Yet, recent government actions suggest the opposite.

In June, stock limits were clamped on wheat, with wholesale traders and big chain retailers not being permitted to hold more than 3,000 tonnes. Late last week, this limit was further lowered to 2,000 tonnes “to ensure that no artificial scarcity of wheat is created in the country”. It raises the question: If domestic market availability based on official production estimates is more than adequate, why should there be any “artificial scarcity” fears or need to prevent “hoarding and unscrupulous speculation” in the cereal?

The issue isn’t simply about government output data probably not squaring with ground reality that points to upward pressure on prices. Of greater concern is how government policy and approach towards agriculture has changed.

The Narendra Modi government, only three years ago, had passed the three farm reform laws. Not only were farmers granted the freedom to sell their produce anywhere and to anyone, private agri-businesses could also now purchase directly from them.

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Today, in their place, there are export bans/curbs on wheat, non-basmati rice, sugar and onion, even as tur and urad pulses too have been brought under stock limits. If these weren’t enough, a floor price of $1,200 per tonne, below which exports aren’t allowed, has been imposed on basmati rice that is hardly consumed by low-income households.

The farm laws may have been repealed following protests that largely resulted from poor communication. But the retrograde “supply-side” actions of the last one year or more cannot be blamed on the farm unions. Worry over food inflation becoming a potent issue in the run-up to national elections has led to the government disowning even the spirit of the farm laws.

Officialdom has been empowered to do whatever it takes in the name of fighting food inflation — regardless of the the long-term consequences. Will these incentivise agri-businesses to invest in warehousing and processing capacities or develop export markets for grown-in-India produce? The government needs to take a call on this — and also on whether it sees agriculture as a problem or an opportunity.

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