Allowing duty-free imports of wheat in the middle of the sowing season, especially when farmers need to be incentivised to produce more of the crop that’s in short supply, isn’t economically the smartest thing to do. Nor is it politically the most expedient, when the country’s two largest wheat-producing states — UP and Punjab — are headed for assembly polls early next year. But given the prevailing situation, the Narendra Modi government was probably left with no choice. Wheat stocks in the central pool have already depleted to nine-year lows.
The new marketing season, beginning April, is likely to see reserves plunge below minimum buffer norms. With farmers short on cash following demonetisation, production prospects for the wheat currently being sown seem uncertain. That being so, the government could have taken few chances. Politically, too, pricey roti can exact a heavier cost than dal, pyaaz or aloo.
The mistake that the Modi government has made is fundamentally about timing, the blame for which lies with the agriculture ministry. By March this year, it was clear that the 2015-16 wheat crop in India wasn’t going to be good. Poor soil and sub-soil moisture levels, thanks to drought, aggravated by high temperatures and absence of winter rain, made this near-inevitable. It was confirmed further during the marketing season, when government agencies were able to procure hardly 23 million tonnes (mt) of grain, compared to 28 mt during the same period last year. Yet, the agriculture ministry reckoned production first at 93.82 mt on February 15 and raised it to 94.04 on May 9, before a marginal downward revision to 93.50 mt on August 2. Krishi Bhawan’s rosy output estimates — as against the private trade’s 80-85 mt and the 2014-15 production figure of 86.53 mt — is what led to the clamping of a 25 per cent import duty on wheat, applicable “without an end date”. This, when open market prices were already firming up by early-May and the situation actually demanded a duty reduction. Farmers wouldn’t have minded that since the bulk of their crop had been sold by then. Had imports been sufficiently contracted during June-August, the current market tightness wouldn’t have arisen. Instead, the duty was cut to 10 per cent as late as September 23 and to nil on December 8, just when farmers are planting the new crop.
The wheat episode reflects poorly on the agriculture ministry’s crop estimation machinery and market intelligence systems. Setting that right, including fixing responsibility, has to be accorded top priority. For now, the cost will be borne, unfortunately, by the Indian consumer and farmer.
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