Controversies over the mishandling of wheat imports, as also mismanagement of the wheat economy as a whole, refuse to go away, and with good reason. Far from learning any lessons from last year's experience, when each successive wheat import tender attracted bids at progressively higher prices, the government is repeating the same drill this year. The manner in which lower-priced bids in response to the international tenders issued in April were spurned and fresh tenders floated is something that needs proper examination, because it was no secret that wheat prices globally were on the rise. The latest tenders have predictably resulted in bids at substantially higher prices, and are politically embarrassing as well because they are much higher than the prevailing domestic prices. | |
| While one question concerns the competence with which imports have been handled (and there is a long history of bungling when it comes to official imports of food items like sugar and edible oils), a more basic question is the import decision itself, at a time when the domestic availability of wheat is comfortable and when this is reflected in open market prices that are ruling much lower than those in the international market. Indeed, even though domestic procurement (at a little over 11 million tonnes) has fallen short of the target that had been set, of 15 million tonnes, it should ordinarily be enough when taken along with the opening stocks available with the government, to feed the public distribution system for a year, until the next rabi harvest. This picture therefore confirms to many farmers the government's willingness to pay higher price to foreign wheat growers than to local ones. It was for this very reason that many farmers opted to hold back part of their produce during the procurement season, rather than offer it to official agencies at the minimum support price. The result was lower than anticipated wheat procurement for the second year in a row, despite the 4.5 million tonne increase in production this year. |
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| When one looks at wheat shortage issues, there is also the role played by a flawed grain allocation policy till late last year. The Food Corporation of India had nearly 10.3 million tonnes of wheat in its kitty in October 2005. Due chiefly to liberal supplies of wheat to even non-wheat consuming states, these stocks got depleted to the vulnerable level of 6.2 million tonnes by January 2006. Though a decision was taken at that time to cut down the allocation of grains to the non-poor and raise PDS prices, besides rectifying the allocation policy, this was not implemented and led to a further depletion of the wheat inventory, to just 2 million tonnes by April 2006. That is what triggered the crisis a year ago, leading to higher market prices and the controversial wheat imports. |
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| The wheat scenario this year seems to be much better. If the available stocks are managed well, the current wheat year should end in April 2008 with a carry-over of 3-4 million tonnes. Under the circumstances, there seems little reason to go ahead with wheat imports at prices of $317 to $370 a tonne, as have been quoted in response to the official tender. In case the government intends to expand its buffer stock, it should explore the possibility of doing so through local commercial purchases. It might find that it saves a lot of money by doing that. |
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