Opinion Paying the price
Why exporting wheat is not a solution in itself
The government has allowed for limited export of wheat. Some have called the measure too little,too late. But there have been other gestures. One was the welcome statement on sugar decontrol. Two,PM Manmohan Singh observed that we were doing well in foodgrain production but not so in other crops. In a fast-growing economy,the demand for these crops is at least twice that for the grains. Significantly,grain policies can have an impact on their performance.
Trade reaction to the announcement of wheat export has been muted. For,global wheat prices are below Indian prices now,and no export is considered possible from the large producers in northern and central India. Export from Rajkot,Gujarat,is talked of and thereby hangs a tale to which we shall return.
We seem to announce policies when the time is the worst for us in global markets. This column has argued for a medium-term tariff policy for agricultural producers with mild protection to farmers in a wildly imperfect global market. C.S.C. Sekhar showed a few years ago that the global wheat market is controlled by the US ,Canada and Australia,but Argentina and the EU chip away at their dominance and small players can exist. Trade would then take care of global fluctuations and we could protect our procurement interests through futures and,of course,some larger storage.
The problem is to maintain a reasonable framework of incentives for all crops. Playing the market with a stable medium-term trade policy was not acceptable to the government. So oilseed and edible oil tariffs are volatile,sugar tariffs are high and cotton tariffs are low. In all of these,plus grains and pulses,falls the heavy hand of quantitative controls,export controls,import controls,stocking controls and sometimes movement controls.
The farmer doesnt worry about foodgrains for he knows the state will buy his crop and give him a fair profit. This,however,is not true of other crops. So the farmer does not grow them unless he is sure of the return. If the PMs admonition is to be taken seriously,we have to create the economic,marketing and trading incentives and infrastructure for a very large number of crops. Nobody seems to address the problem,leave aside solve it.
Now,for wheat exports from Rajkot. Gujarat agriculture is in the news again because the economist Shankar Acharya added his sanguine voice to that of Ashok Gulati and Tushar Shah to argue that it is market-driven,market-incentivised,gets irrigation from private sources and tanks,is growing fast and is diversified. Gujarat agriculture has been diversified since the 1980s. Also,its markets are spread out as M.L. Dantwalas classic study showed decades ago. But,to some,this is a recent phenomenon. If so,then why do market reports say only Rajkot traders may export wheat? More wheat means going back to grains. So what happened to the lectures on diversification? Actually,the area under food crop cultivation in Gujarat grew by 8.27 per cent from 2001-2 to 2006-7. Comparable figures are available,but these are preliminary numbers. Meanwhile,for the same period,triennium averages show that the area under non-foodgrains crops grew only by 4.56 per cent so the share of nonfood commercial crops went down in a state that was supposedly liberalising. The only crop that held out against the onslaught was cotton on account of Bt technology. Acharya is a careful economist but he didnt exactly cover himself in glory when he said the annual growth was 10 per cent plus. In Gujarat,since less than half the area is irrigated,choice of years is important. The increase in shifting from 1999-2000 prices to 2004-5 prices was 24 per cent,much higher than others,and this gave him his results. In fact,if you take the triennium averages between 2005-6 and 2008-9,or numbers from 2004 to 2010,Gujarats agricultural GDP grows by 3.2 per cent a year. This,I believe,is too low since the proper base is the year Sardar Sarovar starts giving water and if you properly splice the change in base prices,Gujarats agriculture is growing at around 6 per cent annual which is high and as predicted by the Sardar Sarovar Plan in 1983.
Gujarat is growing fast not as much as the champions of liberalisation say but as far as agriculture goes. It is exactly what the canal planners said. Canal area went up by 108 per cent from 2002 to 2006 and then it shot up further. Wells and tubewells too went up by 25 per cent. But what has all this to do with wheat exports? Badly implemented canal systems cannot control irrigation and so the farmer grows water-intensive crops. Apart from cane,commercial crops cannot grow with flooding,so diversification is pushed back. The poor kisan,dependent on uncontrolled irrigation,goes back to wheat and paddy and gets the lowest price in India. And,now,you tell him to export it at rock-bottom prices via the trader in Rajkot mandi.
Go out and listen to the farmer before it is too late. What is needed is canals linked up with local tanks and limited irrigation over a much wider area. Also,there should be roads,markets and agro-processing infrastructure off the big cities.
The writer,a former Union minister,is chairman,Institute of Rural Management,Anand; express@expressindia.com
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