Express View on stockholding limits on wheat: Cap doesn’t fit
Amid estimates of record crop, this sends mixed signals, raises questions
The Narendra Modi government has imposed stockholding limits on wheat, bringing back a restriction last clamped in August 2006 and withdrawn in March 2009. But there’s a difference: The 2006 order, capping the quantity of wheat any trader or processor could keep, was in response to a fall in domestic production and depleted inventories in public warehouses amid spiraling international prices. This time around, the Agriculture Ministry has estimated a record 2022-23 crop of 112.7 million tonnes (mt). Also, government agencies have procured 26.2 mt of grain in the current marketing season. Although below the all-time-high of 43.3 mt in 2021, it’s more than the 18.8 mt bought last year. And at $230-250 per tonne, export prices of Russian and European Union wheat are down from the $420-430 levels of a year ago.
It raises obvious questions on the rationale for the move. Is the government worried about the southwest monsoon, which has so far registered 52 per cent below-normal rainfall? While the monsoon season extends from June to September, the prospects of rain — and, by extension, for the kharif crops planted during this time — have seemingly been clouded by El Niño already declared by leading global forecasters. The combined stocks of wheat and rice are comfortable for now, but the fear is probably of a subnormal monsoon that may result in a not-so-good 2023-24 paddy crop. But isn’t that sounding the alarm bell too soon? Over the last one year, the Modi government has banned exports of wheat, broken rice and sugar, besides levying a 20 per cent duty on non-parboiled non-basmati shipments. The stock limits on wheat were preceded by similar restrictions on tur (pigeon-pea) and urad (black gram) holdings by wholesalers, small and big retailers, and dal millers. These are not ordinary precautionary or preemptive actions. Rather, they convey a single-minded focus not to take any chances with food inflation ahead of national elections in April-May 2024.
This approach is also disturbing from another standpoint: It shows the Modi government’s lack of conviction in its own farm reform laws that were touted as a 1991 moment for Indian agriculture. How can farmer unions and the Opposition be blamed for their repeal when the government itself has violated their provisions and resurrected the ghost of the Essential Commodities Act? Equally concerning is the credibility of official production statistics. If Indian farmers have harvested a record wheat crop, why impose stock limits that, if anything, are symptomatic of shortages? Last year, too, the government claimed a bumper production and yet banned exports. Conviction and credibility are central to policy-making. Both are unfortunately all-too-often missing when it comes to agriculture.