Updated: May 22, 2021 9:50:42 am
Last fiscal – the year ended March 31, 2021 – a record 92 million tonnes (mt) of rice and wheat was distributed from the central pool. That included 60.32 mt under the National Food Security Act and other regular welfare schemes, besides 31.52 mt under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), Atmanirbhar Bharat Package (for returning migrant labourers) and assorted programmes launched in the wake of the Covid-19-induced lockdown.
Just for comparison, offtake of the two cereals averaged just 62.69 mt during the previous five years, while amounting to 62.19 mt in 2019-20. The total grain channelled through the public distribution system (PDS) in 2020-21 was, in other words, nearly 50% higher than in normal years.
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But it wasn’t only PDS offtake. 2020-21 also saw exports of 19.81 mt valued at $9.36 billion (Rs 69,331.45 crore). While rice exports were an all-time-high – 13.09 mt non-basmati (Rs 35,448.24 crore) and 4.63 mt basmati (Rs 29,849.40 crore) – the 2.09 mt (Rs 4,033.81 crore) for wheat was also the highest since 2014-15 (see table).
These twin records – of the country exporting close to 20 mt of grain and also distributing 92 mt under schemes such as NFSA (entitling 80 crore-plus persons to 5 kg each of wheat or rice per month at Rs 2 and Rs 3/kg, respectively) and PMGKAY (additional 5 kg monthly allocation for April-November 2020, free of cost) – is a remarkable story of surplus production and stocks in public warehouses. Among other things, it ensured no mass starvation or food riots in India’s worst pandemic. And even after the unprecedented offtake, rice and wheat stocks in the central pool, at 77.23 mt on April 1, 2021, stood above not only the required minimum buffer of 21.04 mt, but also the corresponding year-ago level of 73.85 mt.
Exports, on the other hand, have been surging mainly on the back of international prices. The UN Food and Agricultural Organization’s global cereal price index is currently ruling at its highest since May 2014, when the Narendra Modi government came to power (see graph). The increase in world prices —wheat futures are trading at $259.87 per tonne at the Chicago Board of Trade exchange, as against $184.54 a year ago and $218.07 six months ago — has made exports from India a viable proposition.
Indian wheat is being offered at $280-285 per tonne free-on-board (i.e. after loading at the port of origin). That’s fairly competitive vis-à-vis Australia ($290-300), EU and US ($300-320) or even Russia/Ukraine ($270-280) – especially for supplying to Bangladesh, Nepal, Sri Lanka, UAE and other West and Southeast Asian markets. The $280/tonne rate works out to over Rs 2,050 per quintal, which is more than the government’s minimum support price (MSP) of Rs 1,975.
Wheat sourced from Gujarat, Madhya Pradesh or Rajasthan at below MSP – say, Rs 18,000 per tonne – can easily be exported today from Kandla and Mundra even after adding Rs 1,500-2,000 towards cost of bagging, cleaning, transport, port handling and loading. The possibilities for it can also be seen from the fact that wheat from Shahjahanpur, Gonda or Prayagraj in Uttar Pradesh and Bihar is now being delivered by rail wagons in Bengaluru at Rs 2,050-2,100 per quintal. Flour millers are getting a 1.5% cash discount on top of that. The same wheat is selling at Rs 1,600-1,650/quintal in central/eastern UP and Bihar, where hardly any MSP-based procurement takes place.
Below-MSP sourcing for exports would be all the more in the case of rice. At the MSP of Rs 1,868/quintal for common paddy, the equivalent price of milled rice will be around Rs 28,000 or $382 per tonne (paddy yields roughly two-thirds rice, with the milling and other operational costs recovered from sale of bran and husk). This is more than the $360/tonne and $385/tonne rates at which white non-basmati rice with 25% and 5% broken grains content, respectively is being shipped from Andhra Pradesh’s Kakinada and Vizag ports. Indian white rice is, again, very competitive relative to Thailand’s ($485-495 per tonne free-on-board for 25% and 5% brokens), Vietnam’s ($470-495) and Pakistan’s ($380-440).
While the hardening of global prices has definitely helped, the competitiveness of Indian rice and wheat has also been enabled by two other factors. The first, as already alluded to, has to do with grain being available at sub-MSP. Indian farmers have produced an estimated 109.24 mt of wheat this time. Government agencies, as on May 13, had bought 36.14 mt of this crop in the ongoing marketing season. Almost 90% of it has been from just three states: Punjab (13.21 mt), MP (10.63 mt) and Haryana (8.27 mt). That has allowed enough scope for below-MSP purchases in Uttar Pradesh, Bihar or even Gujarat and Maharashtra for supplying to domestic millers as well as exporters.
But a still more attractive source of export competitiveness could be recycled/leaked grain from the PDS. Given the massive quantities that were offered free/near-free under PMGKAY/NFSA during 2020-21 (55.78 mt of rice and 36.06 mt of wheat), it shouldn’t surprise if a not-insignificant part got diverted to the open market or even exports.
With international prices continuing to rule high – and the Modi government allocating an extra 5 kg of free grain to NFSA beneficiaries for May and June, on the same pattern as PMGKAY last year – the prospects for exports look good in the coming months too. And in contrast to the 1943 famines, this is unlikely to lead to any food scarcity or spiralling prices back home.
(The writer is National Rural Affairs & Agriculture Editor of The Indian Express and on sabbatical as Senior Fellow with the Centre for Policy Research)
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