Lift the food grains export ban!

Yet, there is no speedy action to lift the ban on exports and ensure higher prices for farmers; nor for creating more storage space by investing in US/Canadian style silos! Invest in such high-tech storage facilities and save the rotting grains in the open! Sonia Gandhi drafts a food security bill, to put it more midly, in an anomaly! It is conceived in a context that had already changed against the approach of the ruling party. Other Opposition ruled states have already stealed a march over the Congress approach to win over the vote banks. It looks pretty silly and academic when you sit for so many days at such cost, the National Advisory Council, is also a civil society group of people who are not elected and yet with Sonia Gandhi in the front is acting as a pressure group with not much wisdom and a sense of timing. Who wants a food security bill? Already free rice and wheat are available through the various free food schemes in various states. So, please change your priorities of action. First lift the rotting food grains. Lift the food export ban. Let farmers be enabled to get higher international prices. You please turn our attention to some crying issues like cheap crop loans and other insurance cover for crops that are risky to produce like pulses, vegetables(there is a perennial problem with tur dal producers and tomato farmers in Karnataka).There must be similar many local farm issues. Please tackle such issues. While food stocks rot at godowns and in open spaces in Punjab, Haryana and Andhra Pradesh, the states indulge in free rice schemes! There seems to be total chaos, anarchy may be a more stronger word, in the country, as far as the various vote-getting populist schemes are concerned. In such a context what would you do when you see the TV shots that show rows and rows of gunny bags rotting with damaged wheat and rice (paddy) bags that lie in the open, rain or shine and you see the food grains even letting out sprouts from the gunny bags! The Supreme Court judges also must have seen such TV shots and that is why, simple commonsense, they ordered to distribute a few thousand or few million tonnes of rotting grains as food, free to the malnourished children whose pictures are also often run on the news channels. This year, there is a bumper crop. What is a bumper crop? You only have to ask Mr.Sharad Pawar, the agriculture minister who is otherwise a busy man. There is bumper crop and also there is a ban on wheat and rice exports. So, the Indian farmers dont get an international price for his labour. The Indian farmers lot had not improved. There is excess food production, there is a ban on exports and also there is malnutrition and also free rice distribution. Can anyone make any sense out of this senseless government? Government policies? So, what is the point of writing about agriculture issues? Who cares for such gross realities in the country?

The Finance Minister is also no help to improve things. He hasnt done anything that catches your attention. Poor man, the finance minister! He is now caught in his own fight for life or survival! See what Mamata Banerjee is doing in West Bengal. The Singur land bill is an illegal act and it denies the old MOU with the Tatas whose factor is now openly vandalised and the TV shots again show off the worst kind of anarchy in Bengal. Is this right for the Mamata government to see the villagers and other removing the factory materials in such a defiant manner, where is the law and order. Where is the governance? Will Bengal improve under Mamata? This competitive populism and the Central government machinerys inaction and nonapplication of mind are the result of what we see on the TV screens. We request the government to act in lifting the openly rotting wheat and paddy bags and distribute to states where there are pockets of endemic poverty, as in Vidharbha and other places. Please lift the ban of food grains exports. Let Indian farmers get higher international prices. Please act now and when it is needed to act now.

In the name of poor: at the cost of poor - Milind Murugkar - Email:milind.murugkar@gmail.com

The architect of Indias historical economic reforms has begun his second inning as the Prime Minister. While relatively high growth rate of Indian economy despite global recession is being praised, it is also recognized that the growth has failed to include the vast majority of the poor in the country. Benefits of reforms through liberalized trade were supposed to benefit not just the corporate sector but even the smallest and poorest competitive producer in the country was expected to reap its benefits. It was also expected that the reforms would also threaten the vested interests in the system blocking the way of smart market based approaches to welfare schemes for the poor in the country. We have miserably failed on both this fronts. We have continued to deprive our food grain producers from the benefit of liberalized trade and continue to leave our poorest population to fall prey to the corrupt vested nexus in our system. Recently government banned the export of food grain ,once again denying Indian farmers the benefit of international prices. The government announcement has stirred up no debate. The opposition is silent and so are the NGO activists who never tire of protesting against real as well as imaginary injustices to farmers. Should we treat this as a sign of maturity and attribute this silence to the deeper understanding of the present food grain situation? Not really! During the UPA regime, the ban on food grain exports has been in effect more often than not. In fact, this is nothing other than a continuation of the prereform policy that is always justified on the grounds that high food grain prices will hurt the poor and is never challenged in a political debate. The policy discourse on food security issue in the country has generally bypassed the discussion of adverse consequences of measures such as export ban for farmers and for

agricultural growth in general. We simply refuse to find a just solution to the policy dilemma between protecting the poor consumers from inflation and safeguarding the interests of poor producers. The preferred solution of our policy makers has always been to make the farmers bear the brunt of the cost of protecting the poor. Does the ban on food grains exports help the Indian poor or hurt them? Our answer to these questions would depend on our time horizon. In the short run, the price rise will certainly hurt the poor, even the rural poor. If the food grain prices rise suddenly, it is unlikely that their wages will rise just quickly enough to accommodate this price rise, especially in urban areas. There is no doubt that in the short run the poor will be hurt quite badly. In fact, Amartya Sens account of some of the famines in the 20th century is precisely about this sort of sudden rise in the price of staples. What about the long run? Government policy since independence has been to protect the urban consumer at the expense of the farmer. Farmers are seldom allowed to gain from a strong market demand for their produce. The Essential Commodities Act put additional constraints on farmers, preventing them from taking advantage of market opportunities. It is not just the policy of curbing exports through which the government lowers the farm gate prices, governments policy of imposts has also sometimes amounted to unfair state sponsored dumping for the food grain producers. Two years ago Indian government imported wheat at nearly double the price than what it offered to the domestic producers. Indian farmers were denied international prices through an export ban and also the exclusion of domestic suppliers of wheat from participating in the bidding for contracts to supply wheat. The imports of grain by the government have always been plagued by controversy. Isnt there a simple method to determine the right import price? The fact is, as long as the government is importing, one can never be sure if the import price is appropriate. The issue is not that of corruption. The international market is volatile. And government by its very nature is not equipped to make correct decisions in such volatile situations. The wheat prices indicated by the Chicago Board of Trade (CBOT) indicate only trends in the future international prices. It is important to be aware that most of the wheat consumed in India is not traded there. Therefore, it is intrinsically impossible to know reliable futures prices to make the import decisions. Why not leave the decision of import to the market forces? Whenever the government fails to procure enough for the Public Distribution System or for maintaining the minimum buffer stock, it surely has to buy from the open market. The bidding should be open for domestic traders as well. The least quoted price should be awarded the contract. It should be immaterial whether the supplier is foreign or Indian. It should also be irrelevant where the supplier sources the grain. This automatically rules out discrimination against Indian farmers because if the price in any part of the country is competitive, the grain will surely be sourced from there. The system will allow domestic trading companies to acquire the skills to compete at the international level. We should learn from the experience of edible oils imports. We import close to five million tones of edible oil annually, but one rarely hears about edible oil scam. This is because the imports there take place on private accounts. The lesson is, the job of price discovery and bearing risks in a volatile market should be left to the traders. The ostensible reason for not sourcing the grain from the domestic market is the

possibility of a price bubble a steep short-term price rise following the governments decision to enter the market as a giant buyer. This is the result of speculative hoarding in anticipation of a subsequent sudden increase in market demand as a result of the government entry as a large purchaser. And the price rise, however short, could still hurt poor consumers. But there are two ways to tackle the issue. One, the government should do its procurement in a number of installments rather than in one swoop. Two, the government should declare its intention to procure well in advance so that the market has time to adjust and farmers can decide to wait to sell their grain. The prices, after all, reflect the demand and supply conditions. If the market receives the reliable future demand signal, the prices will be adjusted to this new demand level, avoiding price spike or bubble. The government is better off staying away from a job that it is ill equipped to perform. Unfortunately the debate about grain imports has revolved around the scam theory. Food grain production has rarely been a profitable business for farmers outside the original green revolution belt of Punjab, Haryana and Western Uttar Pradesh. The longrun impact of an anti-farmer policy, with low expected returns and consequently low investment in agriculture, is that we have some of the lowest food grain yields in Asia. A significant majority of the poor in India make their living off agriculture and they will never do well if profitable opportunities are denied to farmers. There is widespread agreement among development economists across the world that poverty in India is a result of the poverty of our agricultural sector. Isnt that the reason why we have so strongly opposed the European and American subsidies to their farmers during all the recent WTO ministerial meetings? We argued that these subsidies lower international prices a policy blatantly unfair to our farmers. This is a very reasonable argument but it hardly makes sense if we are never going to let our farmers benefit from international prices. One way to resolve the dilemma is to allow farmers to have the benefits of international market prices and to protect the poor consumer with a direct subsidy through smart cards or food stamps. The present system wastes a great deal of taxpayers money over the infrastructure needed for the Public Distribution System. Also, since a large part of food grains meant for the poor is illegally diverted to the open market, the system has become virtually non-existent for most poor in the country. Under the proposed system, the day to day movement and storage of food grains will all be carried out by private agents and the government will enter the market only if the prices slide below MSP. The Food Corporation of India would have some chance of becoming a lean and efficient organization. But the reforms of such a radical nature require massive political support as they threaten equally massive vested interests in the present system. Poor consumers and farmers are not an organized political force to overcome such vested interests. Enlightened politicians and civil society groups can play a major role in bringing about this reform. Unfortunately, smart cards or food stamps smack of a market oriented solution and as such is anathema to the well-meaning leftist activists who continue to dominate the discourse on the issue of food security. It is heartening to see that the prebudget economic surevey made a clear mention of food stamps . However, the hopes were dashed when Pranab Mukharjee chose not to touch this point I his budget speech. Food stamps and smart cards offer a promising options to end the conflcting nature of the

interests of two poor sections of the society. It is high time that we radically reform our food policy through introducing these alternatives if we are seriously concerned about poor.

Wheat exports ban lifted, market says move too late

Russia selling the commodity at $244/tonne, India may price it at $300 The Centre has finally decided to lift the four-year ban on wheat exports with grain stocks reaching record levels. Yes, there is no ban. Wheat exports are allowed, Agriculture Minister Sharad Pawar told reporters on the sidelines of an Indian Council of Agricultural Research (ICAR) event, here The move comes at a time when black sea wheat from Russia has already reached global markets. Wheat produced in India and Russian are of the same quality and taste, and both cater to West Asian markets Traders say while Russia is selling its wheat for $244 per tonne, Indian wheat will be priced around $300 per tonne in the international market. Industry insiders say there is very little possibility of finding takers as global wheat prices have fallen by around 14 per cent since June, with Russian wheat flooding the markets. Russia, which is entering the global market after almost one year, is expected to harvest almost 90 million tonnes of the commodity this year up 48 per cent from its 2010 output due to severe drought crippling farm production. With a surplus of over 30 million tonnes, all major wheat import deals over the last few weeks have been bagged by Russia and Ukraine. The best time for India to export wheat would have been March-April, when there was a real shortage of wheat in the global markets, but now that opportunity has passed, an official from a leading global trading firm told Business Standard. He said India was a in a position to sell 1-3 million tonnes of wheat in the international market if exports were allowed in February or March. The government had banned wheat exports since early 2007 to boost domestic supply and contain inflation. Recently, an empowered group of ministers on food (EGoM) headed by Finance Minister Pranab Mukherjee gave an in-principal approval to lift the ban on wheat exports. In early July, the government had foodgrain stocks of around 64 million tonnes, while storage capacity available with Food Corporation of India (FCI) and state agencies was around 63 million tonnes. Wheat production is expected at a record 84.27 million tonnes in 2011, after an all-time high output of 80.80 million tonnes last year. Pakistan tapped the international grain market more efficiently than India. It has sold more than 1.8 million tonnes of wheat since January.

However, India, one of the worlds largest grain producers, kept its doors closed on exports, allowing inventories to soar to record high as it needed to judge its wheat availability in the light of the proposed Food Security Bill. Experts said the timing of Indias decision to allow exports was late and the market was unfavourable.

Govt allows export of 50,000 tonnes of foodgrains to Oman

PTI Jul 12, 2011, 02.37pm IST NEW DELHI: India today allowed the export of 50,000 tonnes of wheat and non-basmati rice to Oman on diplomatic grounds. "We have cleared export of 40,000 tonnes of wheat and 10,000 tonnes of non-basmati rice to Oman through a diplomatic channel," Food Minister K V Thomas told PTI here. Yesterday, the Finance Minister Pranab Mukherjee-headed Empowered Group of Ministers on Food (EGoM) permitted the export of one million tonnes of wheat and nonbasmati rice to neighbouring countries on a government-to-government basis. Out of one million tonnes, 50,000 tonnes of wheat and non-basmati rice will be exported to Oman, Thomas said. Facing the problem of overflowing foodgrain stocks, India lifted an over three-year-old ban on the export of non-basmati rice yesterday and allowed the shipment of one million tonnes. India, the world's second largest producer of wheat and rice, held stocks of 64.12 million tonnes of foodgrains as on July 1, which is more than double the buffer stock norm. According to official data, the country is estimated to have harvested a record 84.27 million tonnes of wheat and 94.11 million tonnes of rice in the 2010-11 crop year.