Unwise decision

The Cabinet's decision to extend the stock curbs on wheat and pulses for six more months is an ill-conceived and ill-timed move that can misfire. That this has been done under the Essential Commodities Act, which empowers state governments to conduct raids on the pretext of de-hoarding and price control, makes it draconian as well. Though, prima facie, the move appears to target private trade, the truth is that it is equally anti-farmer because it has come at a most inappropriate time, when the harvesting and marketing of the new wheat crop is barely a month away. Such curbs may, therefore, deny wheat growers an opportunity to realise prices higher than the government's minimum support prices (MSP) by offering their produce to the private trade and wheat-based industry. The worst affected will be the wheat producers in regions where the Food Corporation of India and other public sector grain agencies do not operate and where prices, in any case, tend to plummet below the MSP in the post-harvest peak marketing period.

The deleterious upshot of this decision, even if unintended, goes far beyond causing hurt to traders and farmers. It can adversely affect the availability of wheat in the open market, especially during the lean season, pushing up prices to the detriment of the majority of consumers, who do not rely on the public distribution system (PDS). Besides, it is bound to pose difficulties for the wheat-based industry, including flour mills, in their search for adequate stocks, thus further constraining the open market availability of wheat products, especially in the later part of the year.

Considering the present wheat scenario, there seems little justification for resorting to such a retrograde and anti-market tactic. Going by the official reckoning, the total wheat inventory in the government's kitty on April 1, 2008, on the eve of the arrival of the fresh crop, would be around 5.3 million tonnes, against the minimum buffer-stocking requirement of 4 million tonnes. Besides, the next wheat harvest is projected officially to be equal to, or higher than, last year's bumper crop, which is estimated now at over 75.8 million tonnes. It is this optimistic reckoning that prompted the government to decide against any further wheat import in the current year. Of course, the government's anxiety to procure enough wheat to cater to the PDS and welfare schemes is understandable. But, for that, the curbs on private trade have to be removed in a year of satisfactory harvest and adequate carry-over stocks.

In any case, the government agencies, even if they operate in all the wheat-growing areas, cannot mop up the entire marketable surplus and that, too, in the short wheat marketing season of 4-5 weeks, prior to the setting in of rains in June. Moreover, if higher official procurement is to be at the cost of wheat availability in the open market, the purpose of such procurement will be largely defeated. What needs to be borne in mind is that domestic wheat prices have tended to remain almost stable this year, regardless of the steep escalation in global prices and without the government off-loading any grain from its stocks. It will, therefore, be unwise to do anything at this stage that might disturb price stability, fan inflationary tendencies and serve as a disincentive for farmers to produce more.