Shivraj Singh Chouhan has taken charge at New Delhi’s Krishi Bhawan as the Union agriculture minister. A political heavyweight in his own right, Chouhan’s long tenure in Madhya Pradesh saw the agriculture sector performing well. But now, a wider variety of concerns is on his table.
To make headway on them, I would first urge him to make a realistic assessment of crop production issued by his ministry from time to time. We face a peculiar situation where production estimates are reaching record levels, yet food prices are skyrocketing. If the production is indeed touching record figures, prices should logically start retracting. However, reality is going the other way.
The government claimed record wheat production last year, but had to impose stock limits on the grain on June 13, 2023. This year, too, government estimates set another record for wheat production at 112.9 million tonnes, but the same restriction had to be imposed sometime back. Is this a paradox of sorts?
It’s not just about wheat—the oddness is true for most agricultural products. This explains our desperation for a good monsoon, which has been erratic this year with a lower-than-expected start followed by a deluge in parts. Climate change is exposing our problem and we need to accept that the days of assured surpluses may be over.
Meanwhile, severe heat waves are delaying the sowing of kharif crops. It is also affected by insufficient water levels in reservoirs in the early part of the season.
In the 2023-24 estimates of GDP, growth in gross value added (GVA) of the agriculture sector was 1.4 percent, while the GVA of the entire economy was 7.2 percent. But in the first advance estimates, the GVA of agriculture was 0.7 percent. Some experts consider the latest estimates inflated.
Despite the efforts of the government, food inflation in May 2024 was 8.7 percent. Foodgrain inflation in the month reached 10.4 percent, while the next crop will take at least three months to arrive in the mandis.
So, are we really in surplus in terms of major agricultural produce, or are we in deficit? To understand this, we need to look at some examples. For the current year, the government has allocated 590 lakh tonnes of foodgrains for the National Food Security Act and other schemes. Of this, wheat accounts for 184.1 lakh tonnes and rice 419 lakh tonnes. Keeping the quantity of wheat low clearly means there is a deficit.
As per the third advance estimates, wheat production is 112.9 million tonnes, which is a record. But in the current rabi marketing season, the government procured 266 lakh tonnes of the grain, slightly higher than last year’s 262 lakh tonnes. At the same time, wheat prices are hovering around Rs 2,600 per quintal, against the minimum support price (MSP) for the current year of Rs 2,275.
Wheat export is also banned. The central pool had 299.5 lakh tonnes as of June 1, 2024, compared to 313.8 lakh tonnes on the same day last year. On April 1 this year, the wheat stock in the central pool was at 75.02 lakh tonnes, marginally higher than the buffer norm of 74.6 lakh tonnes, but the lowest level in 16 years.
Last year, the government imposed stock limits on wheat on June 13, amid estimates of record production. Despite the claim, a stock limit was imposed on June 24 this year too. The government seemingly does not want to accept that this year crops have been damaged in Madhya Pradesh, Maharashtra, Gujarat, and Rajasthan, and there has been a production drop.
Another example is gram. The government initially estimated its production for rabi 2023-24 season at 121 lakh tonnes, which was later revised to 115.76 lakh tonnes in June, whereas the market estimate was around 105 lakh tonnes. The government tried to buy gram for the buffer stock through the National Agricultural Cooperative Marketing Federation of India Ltd and the National Cooperative Consumers Federation of India, but due to higher prices, the agencies procured only 45 thousand tonnes.
Last year, the government had 37 lakh tonnes of gram in the buffer stock, but to control the prices, the government sold most of it and now has only about 4 lakh tonnes. In such a situation, gram imports from Australia have increased and will continue until the next crop comes in March 2025. This is the situation when the government does not count the steps being taken to achieve self-sufficiency in pulses.
Sugar production is 9.65 lakh tonnes less than last year because sugarcane production fell. Sugar exports are also banned. According to government estimates, rice production has been 9.5 lakh tonnes higher in 2023-24 at 136.7 million tonnes.
Due to an increase in rice prices, the government has been controlling its export for a year. On July 20, 2023, the government banned white rice exports and imposed a 20 percent export duty on Sela rice on August 25 last year. A minimum export price (MEP) of $1,200 per tonne was imposed on Basmati exports, which was later reduced to $850. In 2022-23, with exports of more than 200 lakh tonnes, India captured 40 percent share of the global rice trade.
Controlling the domestic market to keep prices low also has dual political disadvantages. As happened in Maharashtra—first, onion exports were banned, and later an MEP and 40 percent export duty were allowed. Despite this, the BJP and its allies lost a number of Lok Sabha seats in the state. Onion prices are now rising and may continue this way until the upcoming assembly elections. The next onion crop will come only in October.
The production of major pulses has gone down, with prices increasing by up to 30 percent. The era of low prices of edible oils has also ended. Despite a 45 percent rise in imports in May 2024, prices have risen by more than 6 percent. Meanwhile, mustard farmers had to sell their crop at prices lower than the MSP of Rs 5,650 per quintal at the time of crop arrival.
Monsoon remains crucial for Indian agriculture. But it is exposing the weaknesses of the government’s agricultural policies and a lack of decision-making regarding the sector. According to the latest NSSO survey, the per capita foodgrain consumption is declining in the country. Actual production does not match the estimates. The wait for new technology and major policy decisions is only getting longer.
In such a scenario, another erratic monsoon will not only harm the rural economy like last year, but will also aggravate the government’s struggle to control food inflation. Rural demand has not yet come back on track, and there might be further delay in its revival. That does not bode well for the whole economy.
(Views are personal)
(harvirpanwar@gmail.com)
Harvir Singh | Editor in Chief, Rural Voice