A Plan for the Winter Crop

Why in News?

• The Indian monsoon (June to September) has ended with a 5.6 per cent deficit compared to the long-period average (LPA).
• Considering lower than the normal rainfall; 96 to 104 per cent of the LPA, which has impacted paddy and tur crops, the government should plan better for the winter crop.

Trends in the Current Kharif Cropping Pattern

• Increased Planted Area of Paddy and Sugarcane: Despite the wide deviation in its temporal spread, especially in August which was the driest since 1901, the area planted under paddy and sugarcane is higher by 1.9 and 7.64% respectively, compared to last year.
• Decreased Planted Area of Pulses
  • The area under pulses is significantly down, by 4.2 per cent, especially Arhar (tur) which has seen a 4.9 per cent fall in cultivated area.
  • In upcoming days, it will lead to the price inflation in tur which is already soaring at 32 per cent in August.

The Government’s Preparations for Rabi Crops

• Ensuring the Availability of Fertilisers
  • Recently, the Ministry of Agriculture and Farmers Welfare (MoA&FW) organised the Rabi Conference.
  • The ministry officials assured that the country has ample fertiliser stocks to take care of the demand of the rabi season.
  • Introduction of Heat-Resistant Seeds
  • Wheat is the main rabi crop, and it is vulnerable to a heat wave. In order to counter it, ICAR has released numerous heat-resistant wheat varieties.
  • These varieties are likely to cover roughly 60 per cent of the sown area up from 45 per cent last year.
  • In the last nine years, India’s agri-research system has released 2,200 varieties of different crops, of which 1,800 are climate resilient.

Outcome of Government’s ‘Production-Centric’ Approach in Last Two Years

• Huge Gap in GoI’s Estimates and Trade Estimates
  • As per the MoA&FW, wheat production in 2021-22 was 107 MT and in 2022-23, it was 112.7 MT.
  • But the trade estimates for these two years are far lower, below 100 MT in 2021-22 and below 105 MT in 2022-23.
  • This huge gap in the GoI’s estimates and trade estimates creates inflationary market expectations.
• Export Ban Policies Failed to Tame Wheat Inflation
  • In 2022, wheat procurement dropped to less than 19MT, a drop of more than 50 per cent from the previous year.
  • As a result, retail prices of wheat came under pressure. GoI put an export ban on wheat on May 13, 2022, fearing that the Russia-Ukraine war could escalate prices.
  • Wheat inflation, less than 10 per cent in May, climbed to 15.7 per cent in August.
  • When the GoI banned atta exports, the inflation did not stop there. It kept going up and in December 2022, it climbed to 22 per cent and further to 25 per cent in January 2023.
• Policy Framework Led to Pro Consumer Bias at the Expense of Farmers
  • The wholesale wheat prices in mandis are hovering around Rs 2,700/quintal, while the minimum support price (MSP) for the coming marketing season of wheat is Rs 2,125/quintal.
  • The FCI has unloaded its stocks at prices way below its economic cost, fearing that it would not be able to procure enough for the public distribution system (PDS).
  • This was literally dumping to beat the market prices down to MSP levels. Offloading 3.4 MT in February-March ensured that market prices were down to MSP, and FCI was able to procure about 26 MT of wheat.
  • Its success cost wheat farmers Rs 40,000 crore. This is a transfer of resources from producers to consumers and indicates a typical pro-consumer bias in the policy framework.

Suggestions to Move from a Highly Production-Centric Approach to a Food Systems Approach

• Change Pro-Consumer Bias Policy Framework
  • More than 800 million people already get free wheat or rice (5kg/person/month) under the PDS.
  • So, it seems the government is trying to protect the urban middle class at the cost of farmers.
  • This is not a rational policy to incentivise farmers to produce more.
  • This is what economists called the “plundering of agriculture” in their classic work, Political economy of agricultural prices.
• Stop FCI’s Dumping and Abrupt Ban on Exports to Beat the Market Prices
  • The government did the same in the case of rice, when there was a complete ban on non-basmati white rice exports.
  • Then export duties were imposed on parboiled rice and a minimum export price was set for basmati rice.
  • The whole effort has been to beat market prices down to the MSP, even if that involves dumping.
  • FCI’s economic cost of rice is around Rs 3,700/quintal, but it is selling rice at below Rs 3,000/quintal.
  • If some other country had been dumping its products in India, the government would have taken the dispute to WTO.
  • But what can farmers do when the FCI dumps its wheat and rice at way below their economic costs.

Way Forward

• Better Estimate and Monitoring of Production and Prices
  • For the upcoming rabi season, the government not only needs better and more accurate estimates of production, but also needs to monitor the prices that farmers get.
  • At a time when technology can track each moving car, why can’t the government monitor the progress of crops every week.
• Need to Upgrade the Patwari-Based Estimate System
  • There is a need to upgrade India’s patwari-based production estimate system to one that is based on high technology.
  • This will help settle crop insurance claims, and give enough lead time to the government to import in time if there is likely to be a shortfall.

Conclusion

• In last two years, there has been a lot of policy fluctuations and abrupt export bans/stocking limits are not the best way forward.
• Instead, there is a need of better technology and better policies to ensure farmers get their due. Only then India can emerge as a powerhouse in agriculture.

Q1) How does export ban help to contain inflation?

A policy brief issued by the Indian Council for Research on International Economic Relations said that the recent steps taken by the government to curb inflation, such as wheat and rice export bans and increasing export duties, were “knee-jerk approaches rather than a well-thought-out strategy”. It argued for a rational trade policy to contain food inflation which takes into account both consumers and producers.

Q2) What has been the impact of heatwaves on wheat production in the last two years?

Due to heatwaves, the production of wheat has suffered in the last two years. Wheat procurement by the government has also been low in the last two cycles. Wheat inflation was 9.22% in August. All this prompted the government to ban wheat exports in May 2022. 

Source: The Indian Express