Importing troubles

Importing troubles

Deepak Parvatiyar

This article was published in Sahara Time on 20 May 2006 

sourced from: http://el.doccentre.info/eldoc1/k34_/20may06sah1.pdf

The thrust on import seems to be a major policy shift of the government - to gradually open the farm sector to foreign competition

INDIA SEEMS to be deliberately allowing global players impede Indian farm sector at the cost of Indian farmers. It is evident the way it first allowed weed-infested wheat shipments from Australia and thereafter, following much brouhaha from the US over the substandard quality of the Australian wheat, relaxed the quality specifications for import of wheat to suit the American exporters.

Experts say the move indicates that India is getting into a situation where it won't be looking into self-sufficiency of food within the country but rather looking internationally to get food security through comparative cost advantage.

But the government is not yet willing to concede this. Its standpoint though is that it has been importing wheat simply because of a shortfall in its procurement and to maintain food security. However sources in the ministry of agriculture concede that the shortfall in procurement could not entirely be linked to lesser yield of wheat but to the open market price of Rs. 9000/ton against the Minimum Support Price (MSP) of Rs.6500/ton plus an added ten percent bonus.

 While there are technical problems of increasing the MSP to match  the open market price, the farmers seem be caught in a trap following increasing disparity in the MSP and the open market price as the government conveniently blame the higher open market price for the shortfall in procurement.

It appears a vicious cycle. The government's argument in favour of wheat import is that since wheat procurement was less, import was

required to maintain the quarterly buffer stock norms for food security and meet social commitments through various welfare schemes for Below Poverty Line families, Above Poverty Line families, Public Distribution System, and Antyodaya.

The thrust on import seems a major policy shift of the government - to gradually open the farm sector to foreign competition. It may be mentioned that the largest procurement of wheat for the government is from the states of Haryana, Punjab and Uttar

Pradesh (Though UP is the largest wheat producing state, most of the wheat is consumed there locally). At today's Minimum

Support Price of Rs 6500/tonne, to move this cargo from North India to Southern states costs Rs 2500 or more, which makes

the landed prices around Rs 9000. But since the import costs Rs 8000, it obviously works out more expensive to transport wheat from northern India to southern states than to import directly to these states. Hence, while importing wheat proves cheaper, experts say import looks inevitable.

The question, though, arises is of itsimpact on poor farmers. Already the adverse impact on the farmers - now desperately

looking at other cash crop with a higher risk factor in terms of the yield - is showing withmore and more debt ridden farmers commit-

ting suicide.

"Today there is no choice. We are still trying to stagger wheat imports so that the farmers' interest is safeguarded," said a well-

placed source in the union agriculture ministry. But there is even more bad news in the offing for the wheat growers as well as rural

poor if the government goes ahead with its plans to rationalize the Public Distribution System and bring down the wheat quota

under it. At present though, the proposal is kept in abeyance but there are enough indications that the government may rake it up

in an all-party meeting.

India for a last few years is facing a precarious situation when annual consumption of wheat has exceeded its annual production.

This was not realized earlier because the country had enjoyed a comfortable buffer stock until two years back and every year it

was using the buffer stock also to cater to its annual requirement. However, the bulging buffer stock resulted in the government sub-

sidizing exports through freight subsidiary during the year before last and the year preceding that. At present the situation is so grim that India may have to import wheat amounting to around 5 million metric tonne per year.

In fact the country is trapped in a catch-22 situation. Over the years, the yield in India has stagnated at around 2800 to 2900

kgs/hectare. There has not been substantial increment in the area under wheat cultivation. The hapless farmers are increasingly

looking at other cash crop for business leading to stagnation at the total cultivated area under wheat. Today, if the government doesn't import wheat then the prices will go high and there will be a food insecurity situation and if the government tries to increase the

minimum support price for wheat, it will lead to high drain on exchequer.

This tricky situation allows the country to be made a green pasture for the leading wheat exporting countries. Already the two

biggest wheat exporting countries the US and Australia see it as a big opportunity to push their wheat into India. Not surprisingly, they are using this opportunity to force India to relax its stringent norms to allow their produce. And this is becoming increasingly evident. Initially the wheat specification for import was not suited for American exports to India and was more favourable for Australian wheat. However, hectic lobbying and media campaign by the US forced India to relax the quality specification to broadbase the sourcing from various origins including the US.

While succumbing to pressure, the State Trading Corporation's latest tender on May 8 does not mention its earlier specification that imported wheat be "free from moulds", and similarly, against the earlier stringent specification that the wheat "shall be completely free from Argemone mexicana, Lathyrus sativus, dwarf bunt (Tilletia contraversa) and ergot (Cleviceps purpurea)," stops at the

first two. It permits presence of the other two fungal pathogens - dwarf bunt and ergot fungi - to the extent of 0.005 per cent and 0.01 per cent respectively. Likewise, while STC's the February 20 tender had stipulated maximum moisture content of 12 per cent, its May 8 tender allowed it to be up to 13.5 per cent. Moreover, while earlier, it was necessary that the wheat cargo be fumigated with methyl bromide at 28 degree Celsius and above before export, now, the exporter has the choice of fumigating by aluminium phosphide before export and subsequently use methyl bromide in-transit. This provision is helpful for countries such as the US, where methyl bromide is seen as an ozone-depleting substance and hence used only selectively at their ports. There are also a couple of other

relaxations, including Bromus rigidus, an exotic weed seed, which is missing from the latest tender. The objective behind adopting more "flexi ble" quality specifications is said to be to facilitate wider exporter participation.

Irony is that this is all in the name of fulfilling the social commitments but at the cost of the debt-ridden farmers!