‘Trade ban sends wrong signal’

‘Trade ban sends wrong signal’
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First Published: Fri, Mar 02 2007. 12 24 AM IST
Updated: Fri, Mar 02 2007. 12 24 AM IST
An experienced agro-economist, T. Haque is completing a three-year term as chairman of the Commission for Agricultural Costs and Prices (CACP), an autonomous government body with the task of setting prices for various agricultural commodities. Low-profile and forthright, he spoke about the current production crisis in an interview with Sukhmani Singh. Excerpts:
How acute is the current foodgrain shortage ?
Right now, it is a precarious situation. For the last 10 years or so, the annual growth in foodgrain production has been much less than the growth in population. Last year, wheat output was 69.4 million tonnes (mt), in 2004-05, it was 68.6mt. The last bumper crop we had was 76.4mt in 1999-2000. We can achieve that level of production in a normal year. This year, the problem will ease if we get 74mt of wheat.
Farmers complain that the Minimum Support Price (MSP) has not kept pace with rising costs of inputs and production, and is not fixed in a scientific manner
That is not correct. We always keep the cost of production in mind. For wheat, we give farmers a margin of more than Rs100 a quintal. The problem is that the gap between the wholesale and retail price has widened, so the farmer loses out eventually.
But MSP has remained fairly static over the past 10 years. Only this season have you increased it by Rs100.
That is because previously we had huge stocks. At one stage in 2002, grain was rotting in the FCI godowns. We were told that was because MSP was too high. But last year, we had to raise it due to a severe shortfall. This year, we may not get sufficient wheat at the existing MSP. We will be in serious trouble if we fail to procure 15mt.
How much of a raise can we expect?
A high-powered committee, with the food secretary as chairman, has been set up to consider delinking the procurement price from MSP. They will probably take a decision in the first week of March. I think farmers in Punjab will be happy with a price between Rs750 and Rs800. The government should beat private traders by announcing a higher price right at the outset.
There are reports that the government has warned private companies not to procure wheat this year, and fears there may be restrictions.
Not true. Private trade won’t be blocked. There is only a decision to check manipulation. In the national interest, we need to procure more and stabilize prices.
One section of economists feels there is no harm in importing foodgrain and exporting fruit and vegetables.
I feel you should only import when there is a need. Food security is very important for any nation. If India starts importing in large quantities, international prices go up, so it is not an economically sound proposition. That is what happened last year.
How do we handle the supply side?
All we need is clarity and good management, not the ad-hoc policy at present. The Indian Council of Agricultural Research claims it has developed varieties of wheat and rice, which can trigger a jump in production in states such as UP, Bihar and MP. But we lack good extension and delivery services for farmers. If you bridge the technology gap, production can be increased significantly.
There was almost negligible allocation and offtake of foodgrain under both the PDS as well as special food schemes last year. Why?
Offtake by states is very low because they lack storage capacity. Ironically, PDS offtake is very good in South India, but very low in Bihar, Jharkhand, Orissa and parts of Maharashtra, MP and Rajasthan where the majority of the poor live. The PDS is not benefiting the poor. Also, central issue prices have not been revised for many years and the government’s subsidy bill is going up.
What is the solution?
These schemes should be scrapped. It would be better to implement land reforms and allocate homestead plots to the landless as in West Bengal and Karnataka. These people can then take up poultry or vegetable cultivation. If the National Rural Employment Guarantee Programme (NREGP) functions properly, you don’t need other schemes. The government should purchase good quality land for the poor, which would cost them just around Rs10,000 crore, as compared with the huge amounts suandered every year. So, you can eradicate poverty and develop rural infrastructure in one go.
A ban on futures trading in wheat and rice has been announced.
A ban is not the answer, it will give the wrong signal. The answer is regulation. Last year, many traders bought grain from farmers, asked them to keep it and picked it up later. Speculative trade should be discouraged. Traders escape without paying any penalty. But I feel this is a temporary ban and will be lifted after the wheat harvest. A panel is to examine futures trading and submit its report in two months.
The government has talked about reforming the Agricultural Produce and Marketing Committee Act for a long time.
Some 17 states have amended the Act, something we could not have dreamt of three years ago. But there’s a lack of proper rules to implement the changes. There is resistance from states as the act generates a lot of money and vested interests are reluctant to disturb the system. The old Act was a great source of income for state governments through the mandi fees from companies buying produce from farmers.
Will farmers benefit from agricultural retail and Special Economic Zones?
No, unless farmers are educated, they will not get the benefit, nor will the landless poor. If only a few companies purchase from farmers, they will create a cartel and fix the price, at the cost of farmers. Yet, farmers selling their land in MP and eastern UP are blowing up the cash in fancy cars and liquor, as they lack the business acumen to invest it. Soon they will be among the landless poor. Farmers losing their land must have education and alternative livelihood options.
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First Published: Fri, Mar 02 2007. 12 24 AM IST
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