Editorial: Procurement lessons

However, regardless of these gains, the situation should lead, at best, to cautious optimism. For, the mopping up of such a large chunk of the marketable grains surplus by the government can create its own problems. In the case of wheat, for instance, the Food Corporation of India (FCI) and state agencies together have bought 20-21 million tonnes, constituting nearly 90 per cent of the total market arrivals. The wheat purchases by the private trade, including the milling industry, on the other hand, are reckoned at merely around 340,000 tonnes, down nearly 85 per cent from the previous year's 2.5 million tonnes. The fear, therefore, is that the open market may face a shortage, particularly in the lean season, exerting an upward pressure on prices. What needs to be realised is that the public distribution system (PDS), for which 90 per cent of the grains have been cornered, is accessible to no more than 35 to 40 per cent of the population. The bulk of the food demand is met by the private trade and wheat industry, which have been deliberately prevented from stocking up grains by imposing stringent stock-and-purchase declaration norms and holding out threats of coercive action on the plea of de-hoarding.

Admittedly, the big wheat growers do tend to withhold part of their produce for deferred sales in the off-season in the hope of getting better prices, but the number of such farmers is not too large. Therefore, the open market may not have enough grains to meet the demand unless, of course, the government decides to offload part of its own grain inventory in the market through open sales, as has been done so often in the past. Otherwise, the government's current approach to wheat management can, potentially, prove counter-productive, defeating the very purpose for which the all-out effort has been made to boost procurement.

As far as rice is concerned, the glitches are of a different nature. These emanate largely from the government's ill-advised moves to ban the export of non-basmati rice and impose an export tax on basmati rice, the burden of which is likely to be passed on by exporters to the basmati growers. Such measures, ultimately, hurt the interests of the growers by depressing the domestic prices. This often proves counter-productive in the end. India had become the world's second largest exporter of rice, which had enabled the paddy producers get good prices. But that incentive seems to have been taken away now. Thus, considering such a potentially adverse fall-out, and in view of the spectacular turnaround in the food reserves, the government should be well-advised to revisit some of its recent policy decisions and relax the shackles on the private sector to improve open market grain availability. Otherwise price stability can be in jeopardy.