Grain gain

The government's new agricultural pricing and food management policy, approved by the Cabinet Committee on Economic Affairs (CCEA) on Tuesday, is good in parts but also has an avoidable mis-step. On the positive side, the bonus of Rs 50 per quintal for paddy and a record 33 per cent hike in the minimum support price (MSP) for wheat, pushing it to Rs 1,000 a quintal, appear to be correct and, in some respects, were essential, considering the domestic and global price scenario. The increase in the prices of other rabi crops, including pulses, oilseeds and coarse cereals, is inconsequential as the market prices of these products usually remain higher than the MSP; even if they fall below that level during the peak harvesting and marketing season, the machinery for effective market intervention to provide price support is missing in most places.

The retrograde move is the ill-advised ban on the export of non-Basmati rice. The adverse repercussions of this measure could destabilise the country's rice economy, which so far has been in good shape. Unlike wheat, which has caused some anxiety because of the depletion of government stocks, in itself the result of flawed allocation policies, there have been no worry points with regard to the rice economy. Both market availability and the official stocks of rice have remained at comfortable levels despite the export of around 4 million tonnes a year. Paddy plantings in the current season were sluggish to begin with, but picked up subsequently and the total area brought under this crop ultimately has turned out to be marginally greater than was the case last year. Besides, the monsoon rainfall in most parts of the country, especially in the regions growing rainfed paddy, have generally been above normal. Though the rain-deficient north-western region is a key producer of surplus rice, the entire paddy acreage in this region is on irrigated land and there has been no constraint on the availability of irrigation water. As a result, paddy productivity is anticipated to be relatively high this year in most areas, generating optimism about a good rice harvest.

Under these circumstances, it is hard to find proper justification for barring rice exports. Quite apart from the macro-picture with regard to demand and supply, the ban has taken rice exporters completely by surprise, especially because it was only a week or so earlier that the food ministry had sent out clear signals that exports would go on. Indeed, export houses are reported to have in hand firm orders for around a million tonnes of rice. The fate of these orders has now become uncertain, even as some stocks are said to be awaiting shipment at the ports. If these stocks are now unloaded in the domestic market, as they are most likely to be, domestic prices can nosedive, to the detriment of paddy growers at a time when fresh paddy stocks have begun arriving in the mandis. There is little doubt that such a situation will help the government to procure more rice, as is presumably intended. But, in the absence of any perceptible growth in offtake from the public distribution system because of low prices in the open market and a comfortable supply position, the additional procurement will only swell the buffer stock. The food subsidy bill, which is already bloated because of high-priced wheat imports, will balloon further as a result.