Thanks to the export ban and a bumper wheat harvest, the government is staring at 65.5 million tonnes of foodgrain stocks, already more than the 63.36 million tonnes it can accommodate across the country, and twice as much as the buffer norm of 32 million tonnes for June.
Last week, an empowered group of ministers (EGoM) headed by Pranab Mukherjee decided to release an additional 5 million tonnes of foodgrains into the public distribution system. The move, which came the day the government announced food inflation at a high at 9.13 per cent, had nothing to do with controlling this inflation, which is a result of the rising prices of dairy products and non-vegetarian items rather than cereal availability.
The excess wheat being released has been subsidised at Rs 6.10 a kg, the rice at Rs 8.45 a kg. This is because pricing closer to existing rates had not worked earlier. Since May 2010, of the 10.5 million tonnes the government tried to release, only 40 per has been cent picked up.
Yet the government may only be buying time with a fresh paddy crop due for procurement in three months’ time.
Outside the mandis sn Rohtak, Jind, Narwana, Kaithal and Kurukshetra in Haryana’s foodgrain belt, wheat lies stacked in the open on wooden plinths and beneath plastic covers. In Punjab, 1.9 million tonnes are being stored unscientifically, without even the necessary plastic cover, Food Ministry sources say.
Nationwide, the wheat lying in the open has doubled in three years. It is fresh in most places, with old stocks yet to be removed from inside. The Food Corporation of India (FCI) godown in Narwana, Haryana, has about 20,000 tonnes wheat outside, with 80,000 tonnes kharif rice yet to be transported out of the covered facility.
Some godowns have removed old stocks but the fresh wheat alone has caused them to overflow. At one place rented by the state, even last year’s wheat remains in the open. Wherever some has been disposed of, fresh wheat is being stacked. Both Haryana and Punjab had to pressure the Centre to evacuate last year’s stocks ahead of this year’s harvest.
“It is a grain emergency. While some people are happy that the country has got over 65 million tonnes, I am not sure whether it is a reason for celebration or serious concern,” says Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices (CACP).
“The government’s buffer norms require only about 32 million tonnes. This additional 33 million tonnes cost the government about Rs 50,000 crore,” says Gulati, stressing the need to export these grains.
The covered storage capacity at FCI-owned facilities has remained stagnant at 12.9 million tonnes for over five years. State agencies have separate facilities but have been reluctant to enhance their capacities. The FCI also rents space or has created covered-and-plinth facilities in open spaces of FCI complexes. The capacity of rented space has increased from 9.34 million tonnes in April 2007 to about 15.5 million tonnes in April 2011.
The government has struggled with efforts to attract private investment. A five-year-guarantee hiring scheme, in 2008, put off possible investors. The guarantee was extended to seven years and then 10, but this took three years and stocks by then had more than doubled, from under 20 million tonnes in April 2008 to over 44 million tonnes this April.
A five-year or seven-year guarantee would not have returned the investment, says Satnam Singh, a commission agent in Rohtak Mandi. Singh, who has bagged a contract to construct facilities for 10,000 tonnes, hopes the 10-year scheme will allow him to break even in six to seven years.
The government plans to create space for 15 million tonnes under the revised scheme. But these facilities will not be ready before 2013. Till June, tenders were still under process for projects covering over 8 million tonnes, and facilities for hardly a million tonnes were under construction.
The government has delayed a decision on modern silos/storage facilities, the issues being identification of locations and costs. The EGoM decided on a pilot project of modern silos for at least 2 million tonnes, but that has remained on paper, despite the success of previous FCI experiments: at Kaithal (Haryana) and Moga (Punjab), the Adani group has been managing modern silos of capacity two lakh tonnes each since 2007.
On the field
Trade groups have been calling for an end to the export ban, while farmers in some states are struggling with low prices. In parts of Bihar and UP, these have slipped below the minimum support price because of the absence of a public procurement network and the reluctance of traders to stock up grains, Krishi Bhavan officials say.
“I visited Bihar last month and found that farmers were selling their produce in the range of Rs 975-1,100 a quintal. The modal price in Bihar was about Rs 1,040 against the MSP of Rs 1,170 a quintal. This is in contrast to Punjab and Haryana where the procurement network is deep and the government even pays state tax to the tune of 14.5 per cent to buy grain for the central pool,” Gulati says.
Even in Haryana, the fear is that farmers may struggle to get good prices for rice after the kharif season, with many premium non-basmati varieties not procured by the government, and because traders may not enter the market as exports stay banned.
Food Minister K V Thomas, who so far had been rejecting the possibility of foodgrain exports, now appears to be open to the idea of allowing limited exports.
“In the last EGoM meeting there was a suggestion to export certain quantities of grain. We are assessing that. I will hold a meeting next week to assess the situation,” Thomas told The Indian Express.