A record foodgrains harvest gives India the problem of plenty

ANALYSIS
A record foodgrains harvest gives India the problem of plenty
Laborers unload the wheat truck, at New Grain Market in Patiala. During the year ended March 31, 2021, the country produced a bumper crop of 109.24 million tonnes of wheat, almost a million-and-a-half tonnes more than in the previous financial year.Courtesy: ANI

Prudent foodgrains management by the government ensured that there were no food shortages anywhere in the country. And despite a 50 percent rise in distribution of rice and wheat from the central pool, there was still enough left over for exports.

India produced a record harvest of wheat for the fifth year in a row in 2020-21, as a result of favourable weather conditions and a series of incentive schemes unveiled by the government. During the year ended March 31, 2021, the country produced a bumper crop of 109.24 million tonnes, almost a million-and-a-half tonnes more than in the previous financial year.

Rice production, too, was at a record high during the year under review at 120.32 million tonnes, 1.2 per cent more than in 2019-20. India is the world’s second largest rice producer and its biggest exporter.

The bumper harvest of these two staples has saddled the government with a problem of plenty. It doesn’t have enough space to store so much foodgrains. But this surplus couldn’t have come at a more opportune time. It has played a crucial role in ensuring food security for 1.35 billion Indians.

India produced a record wheat harvest for the fifth year in a row in 2020-21. Rice output, too, was at a record high during the year. Thus, the government is, thus, grappling with a problem of plenty.

The Modi government used the humungous stocks of rice and wheat lying in its warehouses to hand out food to migrant workers and out-of-job workers hit by the Covid-19 pandemic in addition to meeting its commitments under the National Food Security Act (NFSA).

Huge amounts of rice and wheat distributed

Last fiscal, the government distributed a record 92 million tonnes of rice and wheat from the central pool. Of this, 60.32 million tonnes was doled out under NFSA and another 31.52 million tonnes under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), Atmanirbhar Bharat Package (for returning migrant labourers) and some other programmes to alleviate the lot of people hit by the Covid-19 pandemic.

The total foodgrains distributed last year were, thus, about 50 per cent higher than the average of 62.7 million tonnes distributed over the previous five years. It was this adroit management of the domestic stock of foodgrains that enabled the Modi government to avoid starvations and food riots during the world’s most stringent lockdown last year.

Last fiscal, the government distributed 92 million tonnes of rice and wheat from the central pool. This is 50% higher than the average of 62.7 million tonnes distributed over the previous five years.
A labourer stitches wheat sacks at a grain market before the produce is sold. The rising graph of Indian foodgrains exports was helped along by soaring international prices of rice and wheat.
A labourer stitches wheat sacks at a grain market before the produce is sold. The rising graph of Indian foodgrains exports was helped along by soaring international prices of rice and wheat.Courtesy: ANI

Exports fetched $9.4 billion in 2020-21

The bumper harvest also allowed India to export massive amounts of foodgrains as well. Non-basmati rice exports during the year were at a record high of 13.09 million tonnes valued at $5 billion, basmati exports of 4.63 million tonnes fetched India a little less than $4 billion. Wheat exports of 2.09 million tonne, the highest level of exports since 2014-15 earned Indian exporters about $500 million. The total foreign exchange inflow stood at $9.4 billion.

The rising graph of Indian foodgrains exports was helped along by soaring international prices of rice and wheat. Indian exporters have been exporting wheat at $280-285 per tonne f.o.b. This makes Indian wheat more attractive to buyers in India’s neighbourhood such as the UAE, other parts of the Middle East, Sri Lanka, Bangladesh and Nepal than wheat from Australia, which is selling for ($290-300), the US ($300-320) and other competitors.

Even after the record distribution of foodgrains, the central pool still had 77.23 million tonnes on April 1, 2021, about three-and-a-half times the mandated buffer stock of 21.04 million tonnes.

At $280 per tonne, price is $28 per quintal, which is about a dollar more than the government’s minimum support price (MSP) of $27 per quintal. This makes it viable for the farmer, the trader and the exporter to explore the international market, especially as wheat is sold below MSP in states such as Uttar Pradesh, Madhya Pradesh, Gujarat and Rajasthan. This increases the margins for traders and exporters but gives farmers no extra benefit for their efforts.

Farmers harvesting their crops. If the government’s new farm laws had been accepted, it would have led to a windfall income and greater level of food security both for the farmers as well as for the nation.
Farmers harvesting their crops. If the government’s new farm laws had been accepted, it would have led to a windfall income and greater level of food security both for the farmers as well as for the nation.Courtesy: ANI

Why new farm laws are necessary

This is yet another reason why the new farm laws enacted by Parliament should be implemented at the earliest. They make any payment to farmers of prices less than the MSP illegal and in situations such as now, would have guaranteed higher realisations for them, thus, ensuring a greater level of food security both for the farmers as well as for the nation.

Interestingly, even after the record distribution of rice and wheat from central government stocks, the government pool still had 77.23 million tonnes on April 1, 2021, about three-and-a-half times the mandated minimum buffer stock of 21.04 million tonnes.

With another good harvest expected this year on the back of good monsoon forecasts, rice and wheat exports from India could continue to soar.

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