Source: The Hindu
- Prelims: Direct and Indirect farm subsidies, MSP, PDS, Export policies, WTO
- Mains GS Paper II: Issues related to direct and indirect farm subsidies, issues related to buffer stocks and food security, export policies etc
ARTICLE HIGHLIGHTS
- The Government of India announced a sudden ban on export of wheat on May 13,2022, a few days after Prime Minister Narendra Modi had stated that“at a time when the world is facing a shortage of wheat, the farmers of India have stepped forward to feed the world”.
- The Directorate General of Foreign Trade (DGFT) issued a notification banning exports of wheat with immediate effect to control price rise.
- Even a day before the export ban came into effect, Government officials were looking out for possible export locations,indicating that there were no plans for control of wheat exports.
- The sudden turnaround in the export policy appears to be on account of fears that low public procurement would affect domestic food security.The system of public procurement has been in place since the mid 1960s, and has been the backbone of food policy in India.
- The restrictions would not apply in cases where prior commitments have been made by private traders through Letter of Credit as well as in situations where permission is granted by the government to other countries to meet their food security needs.
INSIGHTS ON THE ISSUE
Context
Present status of India’s wheat exports
- India is the world’s second-biggest wheat producer.
- Major export countries:
- Bangladesh(55.9 percent)
- Sri Lanka(7.9 percent)
- UAE(6.9 percent)
- Indonesia(5.9 percent)
- Yemen(5.3 percent)
- Philippines(5.1 percent)
- Export statistics: In the current financial year 2022-2023, the government estimates about 45 lakh metric tonnes of wheat to have been contracted for exports.
- It has set a goal of exporting 10 million tons of the grain in 2022-23.
- Wheat production in India is expected to be lower than the earlier estimates.
- India exported 7 million tonnes(MT) of wheat in 2021-22 which is valued at $2.05 billion.
- Out of total shipment around 50% of wheat was exported to Bangladesh in the last fiscal year.
Wheat
- The wheat in India is largely a soft/medium hard, medium protein, white bread wheat, almost similar to U.S. hard white wheat.
- Wheat is a major cereal crop in India and is grown mainly in central and western India is typically hard, with high protein and high gluten content.
- It is a Rabi Crop sown in October-December and harvested during April-June.
- Temperature required: Between 23±3°C and for good tillering temperature should range between 16-20°C.
- Better variety of wheat is produced in areas having cool, moist weather during the major portion of the growing period followed by dry, warm weather to enable the grain to ripen properly.
- Rainfall: 50 cm to 100 cm.
- Soil Type: Soils with a clay loam or loam texture, good structure and moderate water holding capacity are ideal for wheat cultivation.
- Wheat producing states in India: Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, Rajasthan, Bihar and Gujarat.
Reasons for the sudden decision by the Government
- wheat production this year is feared to be lower than 100 million tonnes (mt) against initial estimates of a record 111.32 mt.
- Procurement by the Food Corporation of India (FCI) dropped by over 50 percent compared with last year.
- Wheat prices in the country began to increase in the wake of export demand triggered by the Russia-Ukraine war and soaring inflation.
- A sharp surge in global wheat prices that could have affected Indian consumers.
- Fertilizer prices have more than trebled since the Russia-Ukraine war broke out. It will likely lead to lower sowing of wheat across the world and thus, the tight supply situation may continue into 2023.
Demand for India’s wheat expected to rise
- Wheat prices have been rising internationally on account of supply shortages due to the Russia-Ukraine war. The demand for Indian wheat has increased overseas.
- More countries are turning to India because of the competitive price, acceptable quality, availability of surplus wheat and geopolitical reasons.
- While the existing importers are buying more, new markets have emerged for Indian wheat. Exports this fiscal year are expected to be almost 10 million tonnes worth $3 billion
● It is an Indian food Security System established under the Ministry of Consumer Affairs, Food, and Public Distribution.
● It is a system of management of scarcity through distribution of food grains at affordable prices.
● PDS is operated under the joint responsibility of the Central and the State Governments.
● The Central Government, through Food Corporation of India (FCI), has assumed the responsibility for procurement, storage, transportation and bulk allocation of food grains to the State Governments.
● The operational responsibilities including allocation within the State, identification of eligible families, issue of Ration Cards and supervision of the functioning of Fair Price Shops (FPSs) etc., rest with the State Governments.
● Under the PDS, presently the commodities namely wheat, rice, sugar and kerosene are being allocated to the States/UTs for distribution.
● Some States/UTs also distribute additional items of mass consumption through the PDS outlets such as pulses, edible oils, iodized salt, spices, etc.
● It is a Public Sector Undertaking, under the Department of Food & Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution.
● FCI is a statutory body set up in 1965 under the Food Corporations Act 1964.
● It was established against the backdrop of a major shortage of grains, especially wheat.
● It has the primary duty to undertake purchase, store, move/transport, distribute and sell food grains and other foodstuffs.
● The MSP is the rate at which the government purchases crops from farmers, and is based on a calculation of at least one-and-a-half times the cost of production incurred by the farmers.
● MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”.
● Crops under MSP:
The Commission for Agricultural Costs & Prices (CACP) recommends MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.
● CACP is an attached office of the Ministry of Agriculture and Farmers Welfare.
● The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2 other commercial crops.
● In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.
● It is a variety of wheat that received GI certification in 2011.
● It has high protein content and is sweet in taste.
● The crop is grown mostly across the Bhal region of Gujarat which includes
● This variety is grown in rainfed conditions without irrigation.
Way Forward
- A well functioning PDS can control prices and offer relief to consumers. At the same time, procurement policy can and should offer a reasonable income to farmers.
- The government is optimistic about the long-term export opportunities not only for wheat, but for all cereals including millets and superfoods.
- Trade sources say if Indian wheat prices remain competitive and geopolitical and weather conditions stay favorable, the scope is good for wheat exports.
- India needs to establish itself in the new markets too and the government should facilitate it.
- Lessons must be gleaned from the experience 15 years ago when India took about two years to lift its ban on the export of non basmati rice, by which time Thailand and Vietnam had moved in to take full advantage.
QUESTION FOR PRACTICE
On account of supply shortages due to the Russia-Ukraine war, the demand for Indian wheat is expected to increase. In the light of this statement discuss the present status of India’s wheat export and its impact on Indian farmers. (200 WORDS, 10 MARKS)
