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Free grain scheme needs to be backed by imports to cushion wheat prices

Public rice and wheat stocks are at a five-year-low and two-thirds of their level a year ago. India’s next crop will not be ready before March end. Having imported wheat in reserve should help keep a lid on market prices

India’s own next crop will not be ready before March end. Having 2-3 mt of imported wheat in reserve should help keep a lid on market prices till then.

Public rice and wheat stocks, at just over 60 million tonnes as on September 1, are at a five-year-low and two-thirds of their level a year ago. Yet, the Narendra Modi government has extended its free-grain Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme for another three months till December. During 2021-22 (April-March), a record 105.6 million tonnes (mt) grain was channeled through the public distribution system (PDS), of which 41.7 mt was under PMGKAY. In the current fiscal, lifting has crossed 39.5 mt till August, including 17.4 mt under the latter. At the present run rate, and assuming no further extension of PMGKAY, total off take for the fiscal would touch 85 mt. This is as against the annual average of 62.5 mt during 2013-14 to 2019-20, which was post the introduction of the National Food Security Act but preceded Covid.

PMGKAY’s role in ameliorating the distress that followed the Covid lockdowns cannot be overemphasised. The PDS turned out to be the only effective social safety net during the pandemic, which also provided an opportunity for disposing of the excess grain lying in government warehouses. Those godowns are no longer overflowing. Nor is there much logic in continuing with supplying free grain when economic activity has resumed to near-normal levels. True, the all-India average retail price of wheat is now about Rs 31/kg, compared to Rs 27 last year at this time. Prices of atta and rice have, likewise, risen from Rs 30 to Rs 36 and from Rs 35 to Rs 38 per kg, respectively. But in a scenario where open market prices are hardening — because of a failed wheat crop and uncertainty over the kharif rice about to be harvested — even the normal PDS wheat and rice at Rs 2-3/kg will be prone to diversion. Increasing the quantity, that too of free grain, could actually result in the poor getting less and not more.

But having taken a political call, the Modi government must seriously consider importing, say, 2-3 mt, wheat. Wheat from Russia can be imported at a landed cost of around $360 per tonne. The new Australian wheat crop from November should also be available at $370-375. The private trade is unlikely to import at these rates — roughly Rs 30/kg at Indian ports — even if the duty is slashed from the present 40 per cent to nil. All the more reason for the imports to take place on government account and this wheat is used mainly for open market operations. India’s own next crop will not be ready before March end. Having 2-3 mt of imported wheat in reserve should help keep a lid on market prices till then.

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First published on: 03-10-2022 at 04:00 IST
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