Grainy dreams, hard realities

Grainy dreams, hard realities
Comment E-mail Print Share
First Published: Tue, Apr 08 2008. 12 28 AM IST

Illustration: Jayachandran/ Mint
Illustration: Jayachandran/ Mint
Updated: Tue, Apr 08 2008. 12 28 AM IST
The government’s aim to create a five-million-tonne (mt) strategic foodgrain reserve is likely to remain what it is, a dream.
Not only will it be tough to translate it into action, but if it is, it will be very expensive. The biggest obstacle before the government will be to source the foodgrains. It’s likely to run into the same problems confronted in the past years: high international prices and reluctance of local farmers to part with grains at prices offered by the government.
Illustration: Jayachandran/ Mint
There seems to be no strategy to solve these problems. One cannot create a strategic reserve by sourcing domestic “surplus” supplies when the government has difficulties in meeting the buffer stock norms in the first place.
Consider the quantities involved. The reserve is envisaged to be over and above the buffer stock norms. This is different at different times of the year. In July, a month or so after the rabi crop has been procured, the buffer stock norms specify maintaining 17.1mt of wheat and 9.8mt of rice. When 3mt of wheat and 2mt of rice are added to this figure on account of the strategic reserve, the total goes up to a dreamy 20.1mt of wheat and 11.8mt of rice.
Procuring these quantities of grains defies imagination. Of the 75mt of wheat produced in 2006-07 (but marketed in the 2007-08 rabi season), the government could lay its hands on a measly 11.1mt, or barely 15% of the total. Imports had to be contracted at prices much higher than those prevailing in the domestic market. This forced the cancellation of imports after a political outcry.
Now, the government wants to sell the same dream again. Imports, too, are being considered a part of this strategy. Will that prevent price from hardening? The government believes that phasing imports over a weekly or fortnightly period will ensure that there is no cartelization or hardening of prices. With widespread shortages due to poor production and intervention by other governments, players in global markets know better.
The present situation comes out of the ad hoc pricing and procurement policies. In years of abundance, there is pressure to procure less and let the markets work. In years with poor production, the knee-jerk reaction is to scare private players away and letting the Food Corpo-ration of India corner everything. The result is for all to see.
Will the strategic grain reserve be another pipe dream? Write to us at views@livemint.com
Comment E-mail Print Share
First Published: Tue, Apr 08 2008. 12 28 AM IST