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Monday, Mar 18, 2002

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What price wheat?

EVEN AS THE Centre is deeply embroiled in the politically critical Ayodhya controversy, another issue of serious economic consequence is waiting to be addressed — the minimum support price (MSP) for, and procurement of, wheat. The crop is getting ready for harvest in Punjab, Haryana and Uttar Pradesh. Indeed, harvest of the fine cereal has commenced, albeit on a modest scale, in Gujarat and Madhya Pradesh. The Centre, as has become its wont in recent years, is yet to announce the MSP. Obviously, it is dithering. The country is burdened with foodgrains buffer stock of about 57-58 million tonnes. This includes some 28 million tonnes of wheat; ironically, seven times more than theminimum stock norm of 4 million tonnes at this time of the year.

Numerous schemes for liquidation of stocks have met with limited success because of tardy implementation by, or poor response of, State governments. Despite a decent performance (three million tonnes), expectations on the export front have not been met. The food subsidy bill has ballooned to over Rs 17,600 crore this year, overshooting the budgetary provision by a whopping Rs 4,000 crore, mainly because of the profligacy in the management of foodgrains. And, now, with weather conditions favourable, wheat output of around 72 million tonnes is a distinct possibility. Large stocks and good production prospects will inevitably lead to weak farmgate prices which, in turn, will result in farmers rushing to offer the produce for purchase by State agencies. Wheat procurement can potentially reach a staggering 20 million tonnes during April-June, taking its stocks alone close to a monstrous 50 million tonnes, acutely straining the storage infrastructure. This truly scary scenario should not be allowed to develop. It is unfortunate that, in his Budget, the Finance Minister failed to take a tough stand on the issue of food subsidy. Indeed, for 2002-03 he has made a provision of Rs 21,200 crore on food subsidy account and postponed the seemingly inevitable decision on procurement on the ground of waiting for an expert group report. It would be a tragedy if the Centre reconciles itself to continuing the annual hike in support rice — justified or not — and unlimited procurement. States are now lobbying the Centre for a hike in the procurement price. For instance, the Haryana chief minister has not, surprisingly, started his political arm-twisting exercise. In his tours across the State, growers are assured of procurement and higher support price. Belied expectation can lead to disaffection.

The policy of appeasement of entrenched interests has cost the economy dear. The Centre must overcome indecision and muster political courage to take a stand that is in the larger interest of the country. Ideally, it should announce a "procurement holiday"; but as that would be too much to ask, given the political uncertainties, the least it can do is to announce, without losing time, a freeze on the procurement price of wheat and a limit on both volume and timeframe of procurement. Also, prices under the public distribution system should be reduced to a level that would encourage offtake and continued till stocks reach manageable levels. It is also time to look at ways and means of shifting the acreage — at least 2-3 million hectares — from surplus fine cereals to deficit oilseeds and pulses.

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