During 2008, India was caught amidst heightened concerns of food security as global food prices (especially of rice) skyrocketed. The concerns deepened following expert views that prices would remain high for a long time to come and there is no easy escape. Perhaps this triggered India into announcing an export ban on rice which further fuelled rice prices in the global market. However, the reality is that India exported 9.7 million tonnes of cereals in 2007-08, had a dramatic increase in the production of foodgrains in 2007-08 (230.7 million tonnes), and accumulated huge grain stocks in 2008-09, which are at 37 million tonnes as on February 1, 2009.

On the other hand, international prices are cooling off (nearly 50 per cent decline in prices of key traded crops). Therefore, is it not wise to think afresh on the issue of food security in India? Also, think about what the policy flip-flop cost the agrarian sector in particular and the nation as a whole.

Some stats:  Getting down to some basic statistics released by our own government sources, it might be difficult to justify the restrictive trade policies (especially export bans) imposed by the Government in 2008. If one looks at 2007-08, India exported 9.7 million tonnes of cereals (valued at Rs 14,700 crore) compared to imports of 1.8 million tonnes of cereals worth Rs 2,840 crore.

Even when the Government was being criticised for having to import wheat (6.1 million tonnes) in 2006-07; not many took note of the fact that India exported 4.7 million tonnes of rice. And the value of rice exports ( Rs 7,040 crore) was higher than the value of wheat imports ( Rs 5,850 crore) in 2006-07.

India didn’t have to import much wheat in 2007-08 and exported nearly 6.5 million tonnes of rice and about 3 million tonnes of maize. All this happened when the nation was feeling most threatened on the ground of food security. Looking at the production facts, foodgrains production touched a high of 230.7 million tonnes in 2007-08, a 6 per cent increase in a single year from 2006-07.

Production of maize saw a quantum jump from 15 million tonnes in 2006-07 to more than 19 million tonnes in 2007-08; a 28 per cent increase.There are stocks that can be used to feed the poor, the common man and also export without endangering the food security of the masses. But sadly, there is perhaps more complacency in holding onto the grains than marketing the same.

By July 2008, India had accumulated as much as 35 million tonnes of rice and wheat, 33 per cent more than the buffer norm for that period and is continuing with that trend. With already massive stocks in place and an expected good procurement of wheat in the offing, storage will be a major problem given the capacity of about 25 million tonnes. Come July, 2009, the stocks are again likely to peak out.
The past experience of subsidising exports to dilute stocks, if repeated, will be very disappointing in times of abundance, reflecting poor policy responsiveness to changing food markets

Poor economics :

While the political economy behind holding on to large grain reserves is not quite clear, this is certainly poor economics. Before the grains spill over and rodents feast on them, the Government should seriously ponder over releasing the brakes on export of rice and open up the wheat market as well. It has been long debated that the cost of food management by the FCI is much higher than the benefits, and perhaps it is more efficient to allow the private sector to procure and hold stocks. Now that the pressure of price rise has eased to a large extent, the Government can think of opening up the futures market for rice and wheat.
All these policy changes can be brought about simultaneously but it needs some extra zeal. Agricultural markets, both domestic and export, have turned so dynamic that failure to take a timely decision on when to apply brakes and release the same can cost the nation dear. And this does not augur well for poverty alleviation and rural development.
Ashok Gulati,Kavery Ganguly BL100309