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Resource centre on India's rural distress
 
 

Balanced diet

-The Business Standard

Govt policy is warping farm output mix

The crop output estimates for 2011-12 put out by Krishi Bhawan last week – even while projecting a record foodgrain output that would cross the 250 million-tonne mark for the first time – reveal some worrisome inter-commodity imbalances as well. The harvests of wheat and rice – both of which are facing the prospect of a glut with the official grain coffers brimming over – are projected to swell further. But those of pulses and oilseeds, which are scarce and need to be imported, are forecast to shrink by five or six per cent, further constraining their supplies. The output of coarse cereals, too, is forecast to decline; they have witnessed a rapid spurt in demand, for food, feed and industrial uses like manufacture of starch and malt. Although the agriculture ministry is attributing the drop in the output of these commodities to uneven monsoon rains and lack of winter showers, the real problem lies elsewhere.

The government’s misplaced agricultural pricing and procurement policies tend to encourage the cultivation of staple cereals at the cost of equally essential pulses and oilseeds. In 2010, the unprecedented spurt in the prices of pulses and edible oils, along with those of other high-value and protein foods, pushed overall food inflation to worrisome heights. Farmers responded, predictably, by expanding the area devoted to cultivating these crops. However, the record output, which resulted from that move, coupled with government’s price-lowering interventions like cuts in import duties and the sale of subsidised pulses, dashed farmers’ hopes of better returns. This spurred them to, once again, reduce the acreage under pulses and oilseeds. This apart, the kind of marketing support the government provides to wheat and rice, by way of increases in minimum support prices and open-ended procurement, is not extended to pulses, oilseeds or other crops.

The comparative economics of crop cultivation has, thus, been tilted in favour of staple cereals vis-à-vis other crops, notably pulses and oilseeds. Continuing such an ill-advised policy will needlessly perpetuate a dependence on imports, though the demand of these commodities can be met easily through domestic production. India is already the world’s largest importer of both pulses and oilseeds. It is, indeed, India’s import demand that largely determines the international prices of these commodities. The fear is that a higher import bill – likely this year given a shortfall in output – may push food inflation up again. The need, therefore, is for policy to balance the output of cereals and non-cereal essential foods and other mass-consumed agri-commodities. Such a balance was achieved in the late 1980s when, on the advice of the newly set-up crop technology missions, the prices of different commodities were allowed to swing within preconceived bands that safeguarded the interests of both producers and consumers. Government intervention was restricted to protecting the price bands. Similar strategies are needed today to help stabilise the supply, and the prices, of essential items.