Wheat
Imports: Subverting Procurement, Cheating Farmers
By Bhaskar Goswami
16 May, 2007
Countercurrents.org
For
the second year in the running, India is importing wheat. Last year
the government justified imports on account of lower production. This
year it is being justified in the name of higher prices for farmers.
In order to meet the buffer
stock requirements, the government has decided to import up to 50 lakh
tonnes of wheat this year. Thanks to the government’s policies,
from a wheat surplus nation, India today has been reduced to the world’s
largest importer of wheat.
Alarm bells began ringing
in early March when, despite predictions of a bumper wheat harvest in
India, the US Wheat Associates - a trade body funded by the federal
government and US wheat producers - said India will import up to 30
lakh tonnes of wheat this year. Well, not only has the government followed
this diktat, but has revised this estimate by 20 lakh tonnes more as
a small favour to multinational grain corporations.
The rush to go for imports
right now is questionable. With an additional 18 lakh hectares under
wheat, the production has increased by forty lakh tonnes. Since the
peak wheat procurement season is during the second half of May, there
is ample time left for the government to meet its procurement target
of 151 lakh tonnes. On 1st May, the Food Secretary said that stocks
are adequate to last till January 2008. On 5th May, the Food and Agriculture
Minister, Sharad Pawar announced, “Last year, the buffer stock
position was only two million tonne, this time it is 4.5 million tonne.
That is why I am quite comfortable about the buffer stock.”
The Minister justified the
move to import wheat by adding, “However, I want to build up stock
for the next year”. This, when the wheat produced is adequate
to meet the country’s requirements and there is no shortage in
the buffer stock. Wheat for the next season is yet to be planted but
the government is apprehensive of a bad crop next year!
"If the farmer is getting
a better price, as Agriculture Minister I am the happiest person. However,
as a Food Minister, if I face any problem, I will import," said
Pawar. He was referring to farmers getting a better price by selling
to private companies thereby leaving little for the government to pick
up. This is a replay of the 2006 argument, when the Food Corporation
of India (FCI) failed miserably to meet its procurement target. By offering
a lower price to farmers, the government made out a case for imports,
which translated to a windfall of Rs. 5,100 crores to grain corporations
like the Australian Wheat Board, Glencore, Toepfer, Cargill, etc.
This year, the procurement
is worse than what it was last year. By end of April, even half of the
procurement target was not met, and a shortfall of 25 lakh tonnes by
the end of the procurement season is possible. This is because the Minimum
Support Price (MSP) of Rs. 850 per quintal offered by the government
is much lower than the prevailing market rate of over Rs. 1,000. Naturally,
bulk of the wheat is being cornered by the private sector. As expected,
the gains to grain corporations this year will also be much higher than
2006. Lack of rainfall in Europe, Australia and South Africa has affected
wheat production and depressed world wheat stocks to their lowest in
the last 25 years. Wheat from Ukraine and Russia will hit markets only
by August, while Pakistan is still a small exporter. Major wheat exporter,
Argentina, has banned wheat export to control domestic prices.
The only players left are
the US and Canada, where the price of wheat is already up by $40 per
tonne over last year. Given the global supply crunch, announcement of
imports by India will push the price through the roof, as it happened
last year. While last year India paid around $207 per tonne of wheat
(approximately Rs. 930 per quintal), the cost this year is likely to
be upwards of $300 per tonne (or Rs. 1,200 per quintal at the current
exchange rate), a rich bonus for corporations.
Instead of doling out Rs.
6,000 crores to corporations for importing 50 lakh tonnes of wheat,
a hike in the MSP would have fetched an even higher price to farmers
than what they are receiving from private companies and also helped
FCI meet the procurement target. But then that never was the intent.
By paying a premium to grain corporations and denying a fair price to
our farmers, the government has sent a clear message to farmers: they
should no longer expect a guaranteed price for what they produce.
Notwithstanding the government’s
claims, in reality it is building a case to dismantle the price support
and procurement mechanism which are designed to protect farmers from
price volatility and the poor from starvation. The Economic Survey 2005-06
states “Market for farm output continues to depend heavily on
expensive government procurement and distribution systems. A shift from
the current MSP and public procurement system and developing alternative
product markets are essential for crop diversification and broad-based
agricultural development”.
The government is following
this dictum. By deliberately offering a lower MSP and importing at higher
costs, the system is being covertly scrapped. The Agriculture Produce
Marketing Committee Act has been amended to allow private agencies to
directly procure food grains from farmers. The amended Essential Commodities
Act allows storage and movement of food grains. Agriculture commodities
can be traded in futures markets involving speculation. No wonder multinational
grain firms are cornering bulk of the food grains produced across the
country.
There is more. As part of
the larger game plan to shut down the FCI, the government is also toying
with the idea of issuing food stamps to the Below Poverty Line families,
which will reduce the food subsidy bill. There is another proposal to
replace the Public Distribution System (PDS) with direct cash payments
to poor families. To reduce storage costs, the government is considering
playing in the futures market in the months when it needs food grains
for running the PDS - there would be no need for an MSP in such a case.
The warehousing system is also being privatized. Recommendations of
the consultancy firm McKinsey hired by the Food Ministry are already
being implemented and FCI’s capital costs have been reduced, workforce
slashed, minimum buffer stock for rice lowered, and private companies
engaged in procurement.
From all this, it is clear
that instead of fixing the problems at FCI, the government has decided
to fix the blame on FCI and close it down. That there are major problems
with the functioning of the FCI is undeniable. However, dismantling
it will amount to another safety net for farmers as well as the poor,
who depend on the PDS, going down. This, of course, suits the government.
After all, food subsidy for the poor costs the exchequer Rs 23,986 crores
during 2006-07.
The Indian State has a history
of subverting procurement and price support mechanisms. Back in 2002,
dairy cooperatives were on the brink of being wiped out courtesy dumping
by the developed countries, which was facilitated by the State. In case
of cotton, the Maharashtra government subverted the monopoly cotton
procurement scheme and today the price being paid to cotton farmers
is a fraction of what they received earlier. Similarly, Marketfed in
Kerala, which procures pepper from farmers, is facing subversion. The
cases of cardamom, coconut, cashew – in fact, almost all agri-commodities
– have a common thread running through them: deliberate subversion
of procurement and manipulation of support price.
The intentions of the government
are quite clear – deny farmers a higher price for their produce
and dismantle the price support and procurement machinery. While farmers
may presently be getting a higher price by selling wheat to private
players, the euphoria is unlikely to last long. In the absence of MSP
and procurement by government, there are very high chances of concentration
of agri-business corporations. Once this cartel takes over, they will
dictate the price to Indian farmers. With imports being made a norm,
the future of wheat farmers is indeed bleak. It is time to play a requiem
for India’s wheat revolution.
The writer is associated
with the New Delhi based Forum for Biotechnology and Food Security
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