A good southwest monsoon — India has received 7.5 per cent above-long period average rainfall in the current season from June, with 9 per cent and 15.3 per cent surplus for July and August respectively — has led the Narendra Modi government to loosen anti-inflationary restrictions on food commodities. On August 29, the ban on sugar mills to produce ethanol directly from cane juice, syrup or intermediate-stage “B-heavy” molasses, imposed last December, was lifted. Mills/distilleries have also been allowed to use up to 2.3 million tonnes (mt) of rice from the Food Corporation of India’s stocks for ethanol production, after they were barred, since July 2023, from purchasing these in the latter’s open market sale auctions. The moves reflect the government’s comfort vis-à-vis the domestic availability of sugar and rice for human consumption as well as bio-fuel production. This comes amid expectations of bountiful monsoon-enabled bumper crops of paddy and sugarcane to be marketed/crushed from October-November.
But much more needs to be done. The Minister for Consumer Affairs and Food Pralhad Joshi has said that the government is “thinking” of relaxing the prohibition on white non-basmati rice exports, also effective since July 2023. Given the 45.5 mt of rice in public warehouses on August 1, the highest ever for this date, and farmers on course to plant a record area under paddy, there isn’t much scope or time to think. The government must, in fact, even dispense with the 20 per cent duty on parboiled non-basmati and $950/tonne minimum export price restrictions on basmati shipments. It should, likewise, permit resumption of sugar exports — stopped completely since May 2023 — given that mills will start the new season from October with some 9 mt of stocks, as against 5.6 mt a year ago. Not removing export curbs now would cause unmanageable problems of plenty in rice and sugar down the line. The same goes with the present export ban on onions and stockholding limits on pulses. These should go at the earliest, as farmers have significantly expanded acreages under these crops this time in response to both good rain and prices.
Shifting gears in anticipation of evolving supply situations is something the government is least adept at, with its trade policy skewed in favour of consumers and biased against producers. It results in periods of low supply with high prices being followed by that of high supply with low prices — the familiar “cobweb model”, whose effects are accentuated by the clamping of export and stock controls during the former and no action in the latter event. While food inflation remains a concern, the government should be equally watchful of price collapses, whether in soyabean or moong. India cannot afford farmers losing interest in cultivating oilseeds and pulses.
