Too many flip-flops and about-turns

The final act of the wheat ban announcement is still playing out. The Union commerce ministry has just put a precondition that wheat exported at a government-to-government level can only be used for domestic consumption and not be exported to a third country. Meanwhile, hundreds of trucks with about 4 lakh tonnes of wheat meant for Bangladesh are stuck in West Bengal as Customs authorities are not allowing them to go forward, according to news reports.

A brief recap of the sequence of events is in order. The Russia-Ukraine war has triggered a global shortage because Ukraine is one of the major exporters of wheat. The rise in global wheat prices seemed like a great opportunity for Indian farmers (and businessmen) to sell globally. The prime minister had even claimed that India was capable of feeding the world and filling in the gap created by Ukraine in wheat supplies.

India is the second largest producer of wheat but it has not been a major exporter of the grain. The Union commerce ministry had set up a task force and planned a delegation to nine countries to promote Indian wheat. Just a day before the delegations were to leave, the government abruptly announced a ban on all wheat exports with immediate effect.

The sudden export ban created chaos. Trucks loaded with wheat meant for ports came to a halt on highways. Wheat that had already reached the ports got stuck there because it was not clear whether they could be loaded on to ships. Farmers who had not sold to the government procurement agency in order to take advantage of the higher global prices suddenly were stuck without any recourse.

Clarifications trickled in: Orders that were already signed by private traders would be allowed to be shipped. Also, government-to-government deals would continue. The latest detail — that the country which bought wheat from India could only do so for domestic consumption — is a fair decision though it should have been announced right up front.

The wheat ban announcement has triggered a furious debate. Critics say that this abrupt about-turn will only spoil India’s reputation as a reliable trade partner. Other means such as increasing the domestic procurement price could have achieved the purpose. Supporters of the government decision point out that India needs to ensure food security in the country before selling surplus to the world.

Both arguments have some merit but they miss the bigger point. Indian policy-making and policy announcements for the last few years have been made in haste and then modified or revoked equally hastily. Notifications and clarifications keep coming out over weeks and months. Some of them are contradictory and need further clarifications. This has happened in the case of coal procurements/imports, telecom, Covid-19 vaccine exports, e-commerce and even electric vehicles vs internal combustion engine announcements by different high-level functionaries. In the case of major laws such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), notifications, changes, amendments and clarifications were a regular feature long after the original laws were passed. In the case of the IBC, further modifications are not ruled out. In the case of GST, rates continue being tinkered with despite half a decade having passed since the original rollout.

It is nobody’s case that any policy will be perfect from day one. It also makes sense to modify and refine a policy based on feedback over time.

However, the impression that is gaining ground is that in India, policy announcements are often done much before enough discussion and debate has taken place. The drafting of rules is taking place increasingly in isolation without taking enough feedback from people who will be affected by it. And far too many announcements are focussed on the short term and are reactionary in nature instead of being well-thought-out strategies.

It could be that the feedback does not reach the highest levels before an announcement is made. In the case of the wheat delegations and export ban, for example, the fact that the crop had been affected by the heat wave and procurement was not going as planned would definitely have been known to the officers on the ground. Perhaps their reports reached the officials planning to send delegations too late. But the fact that this is not a one-off should worry everyone. The coal shortage being faced by the power producers and the failure to anticipate a surge in coal demand during the summer months and a resumption of normal business is another case of a knee-jerk reaction. Coal shortage in power plants had been making headlines long before the government woke up.

Policy rollbacks and modifications happening too frequently spook businessmen — both domestic and global. Any investor needs to be sure of the policy direction and its stability before working out his or her plans and putting big money on the ground. The United Progressive Alliance government was often accused of policy paralysis because endless debates ensured that no policy was being formulated on time. In the case of the current administrations, the problem is the reverse — policy pronouncements come in thick and fast — only to be modified or reversed equally rapidly.

The writer is former editor of Business Today, Businessworld, and founder of Prosaic View, an editorial consultancy