Let exports happen

BS OPINION

Odd are the ways in which the government manages the country's food economy.

First it makes grain mountains grow to unsustainable levels by announcing arbitrary hikes in support prices and open-ended procurement; then it offers the grain to exporters at hugely subsidised rates in order to prune the massive inventories.

Now, as soon as stocks have reached manageable size, the government has suddenly chosen to stop issuing grains from its stocks for export. This is both ill-conceived and ill-timed.

It has come when another bumper paddy harvest is expected; indeed, rice production in the current kharif may set a record.

Even last year, when the rice output had shrunk drastically, by as much as 13 million tonnes, on account of the drought, rice procurement crossed 15 million tonnes "" more than the annual offtake of rice from the public distribution system.

So there is every reason to believe that procurement will be much higher this year, swelling grain inventories once again. In any case, the total stock even today (before the kharif harvest comes in) is far in excess of the buffer stock norms that require the government to hold 24.3 million tonnes of grains in its coffers on July 1.

The excess holding is more than 10 million tonnes, since stocks are said to be around 35 million tonnes. While rice stocks are about a million tonnes in excess of the buffer norm of 10 million tonnes, those of wheat are a whopping 10 million tonnes higher than the buffer requirement.

There is little chance of these inventories dipping below the buffer stock norm in the next two months, before the next crop starts coming to the market. So it is obvious that continuing with grain exports would not have jeopardised food security.

The government's move is absurd for other reasons as well. For it is not easy to get a foothold in the international grain market. India's grain exporters have not only managed to find export destinations but also succeeded in snatching a handsome market share from established rivals.

The task was unusually daunting, given the quality of Indian grain and the lack of domestic agencies to certify quality and disease-free status.

Nevertheless, India is now the world's second largest exporter of rice and seventh largest when it comes to wheat. Over 20 million tonnes of wheat and rice have been exported since the tap was opened less than three years ago, in December 2000.

Not only this, price realisation for Indian grains has improved by over 25 per cent. And the worst thing to happen to an exporter is the stoppage of supplies, as it destroys his credibility in the market and forces customers to seek out alternative suppliers.

What is needed most of all is a rational pricing and procurement policy. On the one hand, the finance minister reports to Parliament in his quarterly survey of the economy that subsidies have shown runaway growth.

On the other, grain procurement is not being replaced with a more sensible policy that allows the government to stock in private hands at lower cost; nor is pricing being left to the market.

In the immediate context, till the distortions in cropping patterns are sorted out, the best way to contain costs and stocks is to keep the export outlet open.