THE DROUGHT OF 2009 HAS BEEN one of the worst since 1987. Parts of India, especially northern Karnataka and Andhra, have also faced the fury of floods simultaneously. This increased intensity of droughts and floods makes one feel that the impact of climate change is coming on us faster than we thought. If this recurs in future, increased volatility in agriculture production would be a natural consequence . This warrants a re-thinking of our policies to cope up with this volatility, especially of grain that are vital for food security.
Of late, there are frequent reports of shortfall of 6 million hectares in kharif paddy sowing due to deficient monsoon. Some ministers are echoing deficit of 12-15 million tonnes (mt) of rice in public pronouncements to justify the possible rise in rice prices in the coming days. Exaggerated phobia of possible paucity by relying on a single parameter can cause excessive speculation in domestic and international trading community and that can push prices sky high, converting the fear into reality.
For policymakers, it is critical to also look into carry-in stocks and consumption factor before they push the panic button . The analysis below shows that there is an over-reaction to potential drop in production. India has no cause to worry.
A dispassionate analysis of the rainfall deficiency at regional and district level indicates that the paddy crop is very good in the Punjab and Haryana belt, where deficiency of rain has been the maximum. This is due to reliance on groundwater irrigation. It is in the eastern belt (eastern UP, Bihar, Orissa, West Bengal and Assam), which relies on rains despite floating on groundwater, where there is likely to be a shortfall of paddy production. The yields of rainfed rice is generally less than 2 tonnes per hectares. Also, there is possibility of catching up in the rabi season at least in some places of the eastern and southern belts due to late rains.
Taking into account all this, it wont be a surprise if India still manages to produce about 90 mt of rice this year, a shortfall of about 9 mt over last year. But India has carry-over stock of rice of 15 mt as of October 1, 2009 with FCI and other state agenciesthat is more than sufficient to take care of a consumption of about 92-93 mt, even if production drops to below 90 mt. On top of this, there is accumulated wheat stock of 30 mt as of October 1, 2009, against a buffer stock norm of only 11 mt of wheat. Total grain stocks with FCI are 45 mt as of October 1, 2009 against a buffer stock norm of 16 mt. So there is no need for pressing any panic button whatsoever.
The worst will be if the Cabinet decides to import x quantity of rice or wheat. This can set the global markets into tizzy. If at all India needs to import in this year of unusual rains, it should quietly lower the import tariffs on agricultural products by private traders across a wide spectrum, abolish the stocking limits on importers, and bring back key grain (wheat and rice) on future markets to study the behaviour of private trade. Let the private trade decide when and how much of which agricultural product they want to import. This will keep the domestic prices under check without creating any panic.
Also, there is another important policy lesson that India needs to learn from this years experience. It needs to urgently tap groundwater resources through shallow tubewells in the eastern region so that pressure on the Punjab-Haryana belt for common rice can be reduced. The NASA satellites have lately shown that northwest India has been experiencing a fall in its groundwater to the extent of 15 inches each year during 2002-08 . This year it could be even more. This strategy of taking the green revolution eastwards was talked and started after the drought of 1987, but fizzled out in 1990s as we crossed over the hump. It will have to be now put on high priority. And to make it successful, power supplies in the region will have to be improved, procurement mechanism in the region to be made proactive in giving an effective price support. Whenever the eastern region produces a good harvest, their market prices of grain (like wheat this year) drop below the minimum support price as there is no effective procurement mechanism in the eastern belt that is comparable to what exists in Punjab and Haryana.
While this gets underway, the government has to work towards doubling the stocking capacity for grain in the country. It is also pathetic that in Punjab and Haryana grain are lying in the open with half a tarpaulin on it, with rodents having a good time. It leads to large wastages (almost of 10%). Total covered capacity to store in the country is less than 27 mt. Modern bulk handling facilities, preferably under the private sector, coupled with warehouse receipt system, need to be encouraged with capital subsidy schemes (as in cold storages ). Similar encouragement needs to be given for rural godowns that can be operated through panchayats or farmers grain companies. A grain saved is much more cost effective way to manage the fluctuations in grain economy than producing more grain that we cannot properly store.
(Gulati is director, Asia, International Food Policy Research Institute & Narang is a commodity specialist)
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Also, there is another important policy lesson that India needs to learn from this years experience. It needs to urgently tap groundwater resources through shallow tubewells in the eastern region so that pressure on the Punjab-Haryana belt for common rice can be reduced. The NASA satellites have lately shown that northwest India has been experiencing a fall in its groundwater to the extent of 15 inches each year during 2002-08 . This year it could be even more. This strategy of taking the green revolution eastwards was talked and started after the drought of 1987, but fizzled out in 1990s as we crossed over the hump. It will have to be now put on high priority. And to make it successful, power supplies in the region will have to be improved, procurement mechanism in the region to be made proactive in giving an effective price support. Whenever the eastern region produces a good harvest, their market prices of grain (like wheat this year) drop below the minimum support price as there is no effective procurement mechanism in the eastern belt that is comparable to what exists in Punjab and Haryana.
While this gets underway, the government has to work towards doubling the stocking capacity for grain in the country. It is also pathetic that in Punjab and Haryana grain are lying in the open with half a tarpaulin on it, with rodents having a good time. It leads to large wastages (almost of 10%). Total covered capacity to store in the country is less than 27 mt. Modern bulk handling facilities, preferably under the private sector, coupled with warehouse receipt system, need to be encouraged with capital subsidy schemes (as in cold storages ). Similar encouragement needs to be given for rural godowns that can be operated through panchayats or farmers grain companies. A grain saved is much more cost effective way to manage the fluctuations in grain economy than producing more grain that we cannot properly store.
(Gulati is director, Asia, International Food Policy Research Institute & Narang is a commodity specialist)
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