FAULTLINES IN FARM TRADE
President Ronald Reagan of USA remarked in 1986—“The nine most terrifying words in the English language are: I'm from the government and I'm here to help.” These words can be rightly applied in the context of Indian agro-trade policies which were configured in mid 1960s-in the age of Ambassador Car—with updates that are anachronism in recent times. Be it cooling prices of onions or pulses due to inherent shortages or ever increasing intensity of import of edible oil or having dynamic and consistent export/import framework, the government is clueless and helpless in an integrated global environment. It might make right noises of some efforts but the “work done” which equals “efforts” multiplied by “results attained” is virtually zero.
Except for focussing on the issues of over procurement and poor disposal of wheat and rice( current stocks 55 million tons vs buffer norm of 41 million tons in July ) in an arbitrary manner, policy makers have peripheral and reactive approach for other crops like oilseeds, pulses, sugarcane, corn, vegetables, etc. How the Government, including various States, have wrecked Sugar trade is unspeakable. The so called “help” extended in announcing unimplemented export subsidy on sugar, is an open book. Farmer’s arrears of Rs 10000 crore or so for sugarcane is another painful matter.
Further Government is not a guardian angel for bringing down market prices of onions and pulses because it is not a trader in the market. PSUs like Nafed and MMTC, which are extended arms of Government for official intervention, are now dormant entities –stuck with earlier losses and adverse CAG observations of past transactions. Beyond this limited domain of non-deliverable action, policy makers cannot think out of box solutions except for the defunct anti-hoarding measures. Retail inflation in pulses is at 23% in July2015 and is rising for seven consecutive months. Moreover PSUs are unable to operate effectively in a structured environment as the present day purchase/sales contracts will be examined post facto by probing agencies with magnifying glass and eye balls raised.
How can a PSU tender for import of 10000 metric tons of pulses help the consumers? And even if these tenders are repeated dozen times, mitigating shortfall of approximately 4 million tons of pulses to restore balance in the market is an illogical proposition. On the contrary, it has side effects of abnormal escalation in international values of pulses constrained by limited supplies. The cure to rising prices is high prices ---when consumers compress their demand and private buyers defer buying for moderation in market.
Likewise production of oilseeds is stagnant. It is easier to blame recurring unknown phenomenon of weather or monsoon than to tackle the production by known means of for attaining higher yields/ha. Newer technologies for higher yield of oilseeds are not encouraged by the policymakers. States like MP and Rajasthan, who are prominent oilseed producers, are incentivizing wheat –paddy cultivation. The only logical decision taken by the Modi Government is to abandon the levy system of rice that increased availability of the grain in the market in preference to the dead stocks with FCI/State governments, but states like Telengana, and Chattisgarh are trying to revive it at the state level at their cost.
Agro-commodity futures are as good or bad as stock markets with high and low spikes which cannot be handled by bureaucratic formats. India lacks definitive preparedness both in export and imports. Except rice whose exports too are tapering down, none of the other commodities (sugar, wheat, corn, oil meals) have price parities in export—especially when the competition in currency depreciation is fierce with other rival origins like Euro zone, Brazil, Argentina, Russia, and Ukraine. This will lead to domestic surpluses, loss of export markets and lower realization for the farmers. WPI Food inflation of less than -1% as on 1st July 2015 represents stocks built up in the country due to absence of exports.
If, in future, India has to undertake any bulk imports of say edible oil or any major commodity on government account, we are ill prepared to handle such imports both due to procedural wrangles and demoralisation in the major PSUs, even though Government may fund them directly for nominated imports. Many a time deviations may be required to be agreed upon from the tender conditions. The level of decision making may have to be raised to the Minister or PMO level, which was within the purview of the Board or CMD in the last decade. During periods of high volatility—which is bound to occur when India is a major importer—favourable price levels are missed because of “procedures” are to be complied with. Making references to “committee of secretaries” or the cabinet for commodity purchases can be counterproductive. It is high time to set systems right .
We may have lower food inflation, but in dollar terms we are high priced nation in agro commodities. Exports are not seen compulsion these days because crude prices have crashed to $40 a barrel from high of $100 plus in the preceding year. Do we want to live with this trend of declining exports?
Markets can spring surprises and therefore there is no room for complacency in fixing the macro policies before it is too late. The necessity is to have clarity of policies for affirmative action at the right time by stake holders than for the Government to start thinking what to do in the times of emergencies. Otherwise the famous quote of President Regan will prevail.