8 JAN, 2013, ET BUREAU
With over 66 million tonnes of grain already in its stocks, the government rushed in and announced a Rs 650 per tonne increase in the minimum support price (MSP) of wheat, while the wise men of the Commission for Agricultural Costs and Prices had recommended caution: first, a nil increase, and then, a conditional bonus of Rs 40 per quintal provided the government ran down its stocks by at least five million tonnes. Now, the area under wheat acreage has gone up by 4.58 lakh hectare, in response to the higher MSP. The government will end up procuring more, and will soon end up with stocks in excess of 100 million tonnes of grain. This is ridiculous and inane. The increase in area under wheat would be at the expense of mustard, an oilseed. This means that India would be importing even more edible oil next year, adding to the current account deficit. At the same time, private trade stays away from buying grain in the states, thanks to the Centre's blithe readiness to bear the Rs 10,000 crore a year various state governments (40% by Punjab alone, with a 14.5% mandi tax) milk from the food subsidy allocation in the guise of purchase tax on grain. So, the trade waits to buy grain from central stocks when the government makes distress sales, when its storage capacity bursts at the seams. Right now, thanks to a drought in the US, world wheat prices are firm and the government would be able to sell its stocks without making a loss. But this window of opportunity would close in less than four months. Unless the government moves to export wheat through its public sector arms or routing it through the private sector, India will end up with grain rotting and public funds going down the drain. Babus who refuse to take a decision on exports or open-market sales would happily retire, secure in the knowledge that they are safe, thanks to their inertia, from the CAG.
Do two things now to prevent further descent into inanity. Hike urea prices by at least 5% and move fast to export at least five million tonnes of wheat. The impact of higher fertiliser costs is already cushioned by the generous increase in the MSP. Stocks have to be run down to prevent grain rotting by millions of tonnes in public stocks.
With over 66 million tonnes of grain already in its stocks, the government rushed in and announced a Rs 650 per tonne increase in the minimum support price (MSP) of wheat, while the wise men of the Commission for Agricultural Costs and Prices had recommended caution: first, a nil increase, and then, a conditional bonus of Rs 40 per quintal provided the government ran down its stocks by at least five million tonnes. Now, the area under wheat acreage has gone up by 4.58 lakh hectare, in response to the higher MSP. The government will end up procuring more, and will soon end up with stocks in excess of 100 million tonnes of grain. This is ridiculous and inane. The increase in area under wheat would be at the expense of mustard, an oilseed. This means that India would be importing even more edible oil next year, adding to the current account deficit. At the same time, private trade stays away from buying grain in the states, thanks to the Centre's blithe readiness to bear the Rs 10,000 crore a year various state governments (40% by Punjab alone, with a 14.5% mandi tax) milk from the food subsidy allocation in the guise of purchase tax on grain. So, the trade waits to buy grain from central stocks when the government makes distress sales, when its storage capacity bursts at the seams. Right now, thanks to a drought in the US, world wheat prices are firm and the government would be able to sell its stocks without making a loss. But this window of opportunity would close in less than four months. Unless the government moves to export wheat through its public sector arms or routing it through the private sector, India will end up with grain rotting and public funds going down the drain. Babus who refuse to take a decision on exports or open-market sales would happily retire, secure in the knowledge that they are safe, thanks to their inertia, from the CAG.
Do two things now to prevent further descent into inanity. Hike urea prices by at least 5% and move fast to export at least five million tonnes of wheat. The impact of higher fertiliser costs is already cushioned by the generous increase in the MSP. Stocks have to be run down to prevent grain rotting by millions of tonnes in public stocks.
Chemical fertilizers are, on average, priced at higher levels than the organic varieties. While the former do yield faster results – the long-run benefits of chemical fertilizers are suspect. Why bother spending more money on them, when the cheaper organic fertilizers can do a better job? For any wheat, grain exporter – managing finances smartly matters!
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