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| POLICY MUDDLES GALORE-WHEAT GLUT, SUGAR SCARCITY and SHORTAGE OF EDIBLE OILS & PULSES -ALL BECAUSE OF FAULTY POLICIES -
K.Ramasubba Reddy |
A. WHEAT GLUT : |
Agriculture Minister Sharad Pawar said that the country was once again heading towards a wheat glut. The official food reserves are around 13 million tonnes of wheat, against the buffer stock norm of 4 million tonnes. The wheat procurement in the ensuing rabi marketing season in April and May might be 22 million tonnes, pushing up the total wheat inventory to beyond 35 million tonnes. The government needs only about 12 million tonnes of wheat in a year.
Even though there was bumper harvest of wheat and rice, exports were banned with the result farmers were deprived of benefit of high international prices. Export bans imposed by the Government are unjustifiable. India exported around 10 Mt of cereals in 2007-08, compared to imports of 1.8 Mt of cereals. Even when the Government was being criticized for importing 5Mt wheat in 2006-07; India exported 4.7 million tonnes of rice. And the value of rice exports (Rs 7,000 crore) was higher than the value of wheat imports (Rs 5,800 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 there was a perceived threat to food security. 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. 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. There are stocks that can be used to feed the Aam Aadmi and also export without endangering the food security. But the government is hoarding the surplus stocks like a miser instead of allowing exports. |
Now these surplus stocks are rotting in the silos and Government is thinking of allowing exports after May 2009. Farmers are paying the price for the muddled policies of the Government. The carrying cost in FCI godowns is Rs 2,400 a tonne a Year. For each month of storage the cost gets pushed up by Rs 200 a tonne. In other words, a tonne of stored wheat would cost Rs 12,400 (at procurement price of Rs 10,000 a tonne plus a local tax of Rs 1,000 paid at the time of procurement. For 21 million tonnes of wheat that might remain in the FCI godowns for a year, government will have to incur a staggering Rs 10,000 crore just for storage. |
Wheat prices crash: As the official rabi arrival season began on Wednesday, wheat prices crashed on the weight of a record crop in the offing and higher buffer stocks. Prices dropped to Rs 900-925 a quintal in Uttar Pradesh, while in Kota, Rajasthan, it was quoted at Rs 1,020 a quintal, much below the minimum support price (MSP) of Rs 1,080 fixed by the Centre for the current season
The policy flip-flop hurts the agrarian sector in particular and the nation as a whole. And the policy makers responsible for this wastage and loss go Scot free! |
| B. SUGAR MUDDLE- Government is the problem : |
Government, with mule like obduracy, refused to hike MSP of sugarcane even though warranted by increase in cost of production. There was no increase in MSP of sugarcane of Rs 81 even after CACP recommended Rs125 per quintal. Consequently sugarcane cultivation dwindled with the result sugar mills are closing in Feb itself. In U P alone there is 50% reduction in sugar production and in Maharastra 30% decrease. Gauging the shortage of sugarcane, the government pegged sugar output at 16 million tonnes for this season, down from the last year level of about 26 million tonnes. The country’s sugar sector has by now become a classic example of how unwarranted, untimely or delayed Government intervention can distort the market rather than bring order. Concerned over a sharp decline in sugar output during the ongoing 2008-09 season, the Centre has imposed storage limits, and has allowed import of raw sugar. Why did the Government take these precipitate steps at this point of time, when the state of 2008-09 cane acreage and crop conditions were clearly known as far back as September/October 2008? The Government merrily allowed exports until late 2008 despite early signals of an output decline.
The Government is the problem, rather than being part of the solution. A clear failure on the part of policymakers. Given the long crop cycle, cane gives advance signals about the crop size. The competence of the government to estimate cane yields and output is suspect. India is entering the world sugar market as an importer exactly at a time when global output is set to decline by over 10 mt and stocks would invariably be drawn down. The world market has already taken note of India’s import needs and has perked up by about 25 per cent in recent weeks.
All these because of faulty short sighted policies of the government and the farmers are made to suffer for governments’ faulty policies |
Sugar mills now offer higher price for cane cultivation : |
Sugar mills are now encouraging farmers to go in for cane cultivation with higher prices and incentives, fearing sugarcane shortage as farmers divert to other crops. According to industry estimates, sugarcane prices are set to increase to over Rs 1,400 a tonne for 2009-10 season — a 20 per cent increase compared with the prevailing price (between Rs 1,220-1,250). Sugar mills estimate an average shortfall of about 20-25 per cent as of March 2009, the peak planting season. |
Note: These cycles of upswings and downswings of are a direct result of faulty pricing policy. MSP for sugar cane was not raised during last season to meet increased costs resulting in diversion to other crops. Muddled policies continue year after year and no one is made accountable for the terrible loss to the farmers in one year and loss of foreign exchange in the next year for import of sugar. |
| C. EDIBLE OIL IMPORTS IMBROGLIO : |
Mustard production will be up by 31% this year, boosting production from last year's low to 69 lakh tonnes at productivity level of 1050kg/ha. That, though, may be of little consolation to mustard farmers who now have to deal with zero duty for all cheap imported oils including Crude Soya Oil (CSO) that are flooding the market and already pressuring down oilseed support prices for them. Already, there's a 30% drop in mustard price for the fresh crop compared to last year. Unless the government puts in enabling policies that curb and contain cheap edible oil import floods in the markets, domestic oilseed farmers cannot be assured a good return and will switch to other crops. That will not only leave us, in the longer term, at the complete mercy of high priced imports but also irreversibly weaken our own edible oil sector. Mustard Research and Promotion Consortium (MRPC) |
TRADERS’ POINT: Edible and non-edible oils lost, on restricted buying in the face of adequate stocks positions after fresh imports by the government and a ban on export of edible oil for at least one year. The continuing low import duty regime on edible oils may lead to prices of the rapeseed-mustard crop dipping below the Centre’s minimum support price MSP “Even at a price of Rs 2,000 a quintal to the farmer for mustard. India's import of vegetable oil may increase to 70 lakh tonnes in the oil year starting November 2008 mainly because of zero duty, even as the country is estimated to have produced oil higher than in the previous year. Addressing a press conference here on Friday, Central Organisation of Oil Industry and Trade president Davish Jain said the import would be over 70 lakh tonnes as against the domestic requirement of 130-135 lakh tonnes. Since the domestic production of edible oil is expected to be higher at 85-90 lakh tonnes, there will be at least 20 lakh tonnes of surplus oil in the country, he added. He also pointed out that the announcement of zero import duty on crude soyabean oil is not warranted at this juncture when prices of edible oils are already low. The Association said that cheaper imports would bring down the domestic prices of mustard with the new crop to hit the market soon. The overall imports between November 2008 and February this year have gone up by 68 per cent to 29.51 lakh tonnes, compared with 17.61 lakh tonnes in the year-ago period. TH 210309 |
COUNTER POINT: Millers are once again using oilseed growers as a front to achieve their price and profit objective. Indeed, if oilseed growers are able to hold on to the harvested crop in hope of higher prices, it shows an improvement in their holding capacity. It is a positive sign. Also, so long as farm-gate prices do not go below the minimum support price , the industry must focus on improving its own operational efficiency and rely less and less on speculative trading positions. It may be inappropriate to compare edible oil prices of March 2008 with March 2009 to show that the market has collapsed. Indeed, at this time last year, the entire commodity complex was on a bull run and prices reached artificially high levels because of unbridled speculation. What we witness now is healthy correction. The market is currently moving more on demand-supply fundamentals than on extraneous considerations. Despite the fact that overall inflation is on the decline, food inflation is still not under control. Edible oil has a high weightage in consumer price index. BL21030 |
FARMERS’ POINT: The Government is interested in the consumer and the traders are interested in getting more profit. In this squabble between two powerful groups, the hapless oil seeds producing farmers are the losers as farm gate prices are going to be less than MSPs. ANY ONE WHO WILL FIGHT FOR ECONOMIC JUSTICE FOR THE FARMERS? |
| D. PULSES POLICY PALSY : |
The Govt has decided to extend the ban on the export of pulses for a period of one year and also decided to extend the import of pulses at zero duty. But in the process, the longer-term future of pulses is ignored. The Economic Survey tells us that the trend growth of production of pulses from 1989-90 to 2006-07 is negative and that of the yield is a measly one-third of 1%. In this decade, the yield has varied between 580kg per hectare to 650kg, as in the past. Nothing ever changes. Many farmers get yields of over 2,000kg and the government spends thousands of crores on the Krishi Vikas Yojana to achieve the yield potential. . Pulses are grown in the poorest regions—MP, the Agra division of UP, dry regions of Maharashtra, and so on—and it is a crop on which farmers can make money. They don’t need much water, but good seeds need protective irrigation, which costs money in the dry regions and so do the new seeds. These also need fertiliser and pesticides. The government will give them subsidies and NREGA money, but, strangely, not let them make money from the market. And they will not have a programme for technology upgradation with economic support built in for those early years when the farmer actually needs his hand to be held. So, the problem of pulses is in the policy. Unless the government gets its act together, farmers in poor regions will be living off state-supported NREGA rather than make a market-based living out of pulses production. |
| PAUCITY OF PULSES : |
Since 1967, the overall yield growth in pulses has not matched the yield growth in other crops. The Assocham study said that since the green revolution, while per hectare yield of wheat, rice, oilseeds and maize has risen by 2.8%, 2.23%, 1.8% and 1.7% respectively, yield of pulses has risen by just 1.1%. The study also showed that if corrective steps are not taken immediately, India's per capita pulses consumption will fall by another 10 kilogram by 2010 due to decline in production and constant rise in prices. Already, per capita pulses consumption in India has dropped by half since 1958-59 from 27 kg a year to around 13 kg a year. India's annual pulses production witnessed a very slow growth of less than 1% in the last five decades. If adequate attention is not paid towards pulses production in the country by bringing in more area and improving yields, supplies would remain constrained in the near future. |
Suggested policy changes: Allow export of wheat and Rice, Hike MSP of Sugar cane to Rs.215 per quintal, Impose import duty on pulses and edible oils. Pay greater attention to improve yields of pulses and edible oils.
Krsr 040409 |
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