Wheat imports spell a bitter harvest for UPA government

Wheat imports spell a bitter harvest for UPA government
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First Published: Wed, Sep 05 2007. 12 22 AM IST
Updated: Wed, Sep 05 2007. 12 22 AM IST
New Delhi: The ruling United Progressive Alliance’s (UPA) decision to import wheat at nearly Rs16 a kg, against the Rs8.50 a kg it was willing to pay to domestic producers to acquire the crop, has further alienated its outside supporters among the Left parties, enraged the Opposition and surprised many experts.
“One can understand the government’s desire to fight inflation, but this is not the way to do it,” said Yogendra K. Alagh, a former member of the Planning Commission, India’s apex policy planning organization.
“You have to create a level playing field for your own farmers. The policy is completely wrong, even tragic, if you consider that Indian agriculture is actually coming out of a trough, up from barely 1.8% growth to between 2.5% and 2.8%,” he added.
If the government goes ahead and increases domestic procurement prices from Rs850 a quintal (100 kg), it runs the risk of fanning inflation.
At the same time, with global wheat supplies running at a 26-year low, imports are no longer a cheap option.
According to Alagh, the government should not be importing wheat at a price that is more than the domestic price plus the cost of transportation. “The liquidity overhang responsible for inflation must be tackled through fiscal measures. As for wheat, there is no long-term solution except to increase production,” he added.
On Monday, the government asked the State Trading Corp., the importing agency, to buy 795,000 tonnes of wheat at an average price of $389.45 (Rs15,967) per tonne.
This decision came less than four months after the government had cancelled import tenders, saying that the prevalent price of $263 per tonne was too high, and a month after it agreed to buy 511,000 tonnes of wheat at an average price of $325.59 per tonne.
The decision to import wheat was taken by the empowered group of ministers (eGoM), headed by external affairs minister Pranab Mukherjee. Sharad Pawar, minister for agriculture, consumer affairs, food and public distribution, was not present at the meeting as he was out of the country.
“This is just another reminder of the vulnerability of the government to external factors, the compulsion of coalition politics, and the selfish interest of the policymakers,” said Bidyut Chakrabarty, who heads the department of political science at the University of Delhi.
“The allies are squeezing gains disproportionate to their strength,” said Chakrabarty.
The Left parties were even harsher in their response.
“This is simply unacceptable. The Left parties have been consistently opposing the government’s procurement policy. We will raise the issue again in Parliament and even demand a white paper on the issue,” said G. Devrajan, national secretary of the All India Forward Bloc, one of the four constituents of the Left Front, which provides critical outside support to the ruling UPA government.
Prabha Rau, head of the Congress party’s state unit in Pawar’s home state, Maharashtra, too, said: “In a country which has implemented the green revolution concept, it is not befitting that we should have to import wheat.”
The Congress leaders in New Delhi could not be reached for comment.
Relations between the Congress-led UPA and the Left Front have already been strained due to differences over the Indo-US nuclear deal and India’s growing strategic ties with the US.
“This is another glaring example of the gross mismanagement of food economy in the country,” said Ravi Shankar Prasad, national spokesperson of the principal opposition, the Bharatiya Janata Party (BJP).
In a press statement, Prakash Javadekar, a national spokesperson of the BJP termed the decision “a shameless loot of the nation and betrayal of Indian farmers...The lame excuses given by the government only confirm the existence of vested interests. The scam is going to be the ‘wheatgate’ of UPA.”
Agricultural economist and head of the National Commission on Farmers M.S. Swaminathan, however, said the government, due to its policies, was left with little choice in the matter.
“If we had enough market intelligence, we wouldn’t be buying at these prices. If we had postponed the entry of private players in the domestic market, we would have seen better procurement by the government, thereby avoiding the need to buy from abroad,” he said.
“In May, the government felt international prices would dip. The prices rose instead,” said Swaminathan.
“But you still need buffer stocks of not less than 10 million tonnes (mt), if you have to feed about 1.5mt a month to the public distribution system (PDS),” he added.
Officials in the food ministry concede that there was miscalculation. “We had expected international prices to come down as more wheat was expected to come from the Black Sea region. But due to poor weather, output in these regions was affected, which further fuelled the rise in (global) prices,” said a senior government official who did not wish to be identified.
India had hoped to import wheat from Ukraine, Kazakhstan, Canada and European Union in June and July, when prices rose due to the unexpected supply crunch.
Australian wheat, which hits the market in October-November, is not expected to come cheap either as the output is likely to get affected by the dry spell that the country has experienced this year.
“Our knee-jerk approach sends wrong signals in the international market,” admitted the official, who added that, in a meeting with the cabinet secretary nearly two months ago, it was decided that India could take tips from Egypt, which imports 5-6mt of wheat a year, but in small quantities on a monthly basis.
Significantly, the government is importing the staple crop at a time when annual domestic production has risen by nearly 6mt to about 75mt.
This year, the government has mopped up 11.1mt from domestic producers, 2mt more than last year, but is still short of the adequate level of reserves by 4.5mt.
Political affairs analyst Mahesh Rangarajan said the problem was manifold as the government had failed to reach out to the domestic farmers.
“Farmers are not getting their due, either through credit or support prices. Stocks are inadequate. And there is a clear conflict of interest between the supply to urban consumers and the compensation to rural producers,” he said.
However, Rangarajan said the food and agricultural minister ended up pleasing nobody because the rural producers comprised the majority of country’s consumers as well.
“The agricultural crisis is clearly deepening. Are we going to become chronic wheat importers, despite a rise in production? The PDS, too, is in a mess, except maybe in parts of South and West India,” he added.
(ashish.s@livemint.com)
(PTI contributed to this story.)
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First Published: Wed, Sep 05 2007. 12 22 AM IST