Govt plans to set up real-time agri supply-demand model to predict prices

The step comes at a time when consumers have been battling price volatility in several essential commodities and the government has launched a slew of measures to keep inflation in check.

While inflation in retail cereal prices has been in double digits for several months, recurrent volatility in prices of vegetables like tomatoes and onions has been a sore point for consumers, farmers and inflation managers.

A real-time model could also prevent India from mis-steps like last year’s when it miscalculated the size of its wheat harvest which led to a policy flip-flop—of promising to export wheat following the Ukraine war, and then hastily imposing a ban soon after.

“The government aims to understand and predict future price behaviour of crops and their key commodities through this model," said the official.

“It wants to assess opportunities for export, windows for import, the expected impact of policy actions, and create a mathematical base for trade policy. This will make policy rule-based wherever possible," the person added.

According to the official, sugar, maize and edible oils are likely to be the first three commodities for which the model will be built.

Sugar is a global crop with both consumer and industrial demand. India is one of the largest producers of sugarcane globally. In the case of maize, it caters to the feed, food and starch industry. Besides, maize is estimated to be a critical feedstock in meeting the country’s E20 ethanol mandates by 2025-26.

There is intense competition for maize from the poultry, starch and potable alcohol industries. These industries are growing at double-digits, as is their maize demand. In assessing maize supply and demand, a simultaneous assessment of the demand from competing industries is required.

For edible oils, India’s dependence on imports has grown rapidly in recent years. In 2021-22 oil year, the edible oil import bill shot up 34% year-on-year to a staggering ₹1.6 trillion, prompting a policy intervention. An oil year runs from November to October.

“There is no official or unofficial estimate of private stocks of key agricultural commodities," said the official. However, since it is necessary for predicting prices, it will be a key input for the demand-supply model, the official said.

“Simulated estimates of stocks in the country for that crop with the government and state agencies, traders, wholesalers and other players in the value chain and farmers will be done," the person added.

Queries sent to the ministry of consumer affairs, food and public distribution remained unanswered at press time.