Bungling now in rice

After having mucked up the wheat sector to the extent of necessitating costly imports, the government seems to have turned its focus on paddy, the other main staple "" with perhaps similarly negative results to be expected. Poorly conceived tinkering with prices and trade policies, with wrong timing to boot when it comes to imports, has been the undoing of the wheat economy. The same mistakes are being repeated in the case of rice. First, there was the delay in the announcement of the procurement bonus till a part of the harvest was already marketed. Then came the banning of rice exports in order to depress domestic prices, just when farmers were bringing their produce to the market. The bonus of Rs 50 a quintal also served to underline inequity. For, it raised the procurement price of paddy (Grade A) to a mere Rs 775 a quintal, far lower than that of wheat at Rs 1,000. This has naturally fuelled the demand for price parity with wheat. Till 2005-06 or thereabouts, the price difference between wheat and paddy was rarely greater than Rs 50 a quintal, but the gap has now increased to Rs 225. The government has therefore exposed itself to the charge of discriminating between wheat and paddy growers. Not surprisingly, when the subject came up in the Rajya Sabha, even Congress members added their voice to the demand for the restoration of price parity between the two cereals.

The delay in the announcement of the bonus has raised questions, meanwhile, about whether it was done intentionally to benefit rice millers, at the cost of growers. It needs to be borne in mind that the Food Corporation of India (FCI) and other official agencies procure paddy directly from growers in only a few states, largely in the north. The bulk of the farmers elsewhere have to sell their stocks to rice millers, who are not required to offer the official price.

What added to the woes of those producing premium-quality paddy was the sudden drop in prices in the wake of the ill-advised blanket ban on the export of non-basmati rice, right in the midst of the marketing season. Though this ban was subsequently replaced with a minimum export price which would act as a barrier to exports, the damage had already been done and the victims were both the producers and exporters of such rice. The government's bid to justify this move as a measure to boost domestic procurement does not cut much ice. Unlike wheat, there was no shortfall in either the production or the procurement of rice in recent years. In fact, rice procurement had been on the rise, leading to comfortable official inventories, despite the exports. In any case, export-quality rice is seldom bought by the official agencies, since it usually commands prices that are much higher than the support prices. The futility of these ill-advised moves is now confirmed by the fact that paddy procurement has not picked up, being 6 per cent short of last year's level as farmers have chosen to wait for the government's next move before disposing of their entire produce. Now, will there be rice imports too?