Grain of the matter

Govt's grain stock reduction is a good development

The sharp decrease in the government’s wheat inventories this year is neither unexpected nor a matter of concern. Though the quantity of wheat in the official grain coffers has declined to 28.5 million tonnes, the lowest since 2008, it is still about a million tonnes higher than the stocks needed to be held as buffer and strategic reserves for food security purposes. Besides, there is no dearth of wheat in the market despite record exports and liberal shipments to other countries on humanitarian grounds. About 1.8 million tonnes of wheat was sent to about a dozen countries, including Bangladesh and Afghanistan, even after the imposition of the ban on wheat exports in May. The prices of wheat in the open market, too, have remained fairly stable, which is another indication of the comfortable supply position.

The reasons for the depletion of wheat holdings are several. The most significant among them is the fall in crop output due to intense heat in March, which caused the grains to shrivel and ripen prematurely without attaining full mass. Wheat output, anticipated originally to be over 109 million tonnes, fell to 106.4 million tonnes. Besides, the procurement of wheat under the government’s price support operations also dipped by a huge 60 per cent due to lower market arrivals and larger out-of-mandi purchases by private traders, notably exporters, at rates higher than the minimum support prices. This benefited the farmers. Wheat exports turned relatively lucrative this year because of the supply crunch-driven spike in the prices of this staple cereal in the international market in the aftermath of the Russia-Ukraine conflict. Export cuts by major grain suppliers due to domestic food security concerns also contributed to it.

From the economic standpoint, reduction in the government’s grain stockholding is a welcome development. This would help bring down the needless cost the Food Corporation of India incurs on holding surplus food stocks, which, ultimately, are reflected in food subsidy. In fact, there is also a need to prune the inventories of rice, which, at present, are estimated at more than double the requirement of the public distribution system and food-based welfare programmes. No doubt, exports from the public food stocks are disallowed under World Trade Organization (WTO) rules, but the government is free to offload them in the domestic market to downsize the stockpiles. The WTO would be well-advised to accede to the plea by India and many other countries to waive this caveat in view of the current global food crisis. India has exported a record 21 million tonnes of rice and even now has enough surplus stocks to help countries facing acute food insecurity.

The question that has, of late, assumed relevance is whether the time is ripe to diversify cropping patterns by shifting part of the paddy acreage to other crops, especially oilseeds, for which the country is still heavily dependent on imports. Some states, including Punjab and Haryana, have already begun offering cash incentives to farmers to replace paddy with other crops. There is scope for similar moves in many other states as well. But, in the case of wheat, which can be grown only in the north because of agro-climatic factors, the country could still do with added production.