Modi Govt. Fixated on Wheat Exports, Flour Prices Rising, Wheat Shortage Looming
WHILE prime minister Modi was, as usual, busy inaugurating projects in poll-bound Gujarat and visiting Europe, retail prices of another essential food item, wheat flour or atta have reached their highest level. According to data collected from across the country by the central government’s department of consumer affairs, average atta prices have increased from Rs 28.80 per kilogram in May 2021 to Rs 32.91 in May 2022. That’s a 14 per cent increase in one year, the biggest increase since such retail data became available from 2010.
Atta is a staple of a very large number of families, especially in the north and central India. The rise in its prices will severely damage the family budgets of the poor. Unlike pulses or specific seasonal vegetables, a family cannot replace or stop using wheat till its prices cool down. This means that there is no escaping the damage such an onerous price rise is causing.
Coupled with the ongoing price rise in some other essential commodities, especially cooking oils, distress due to price rise is rapidly reaching unbearable scales.
Milk is selling at above Rs 50 per litre. Most widely used cooking oils are selling at nearly Rs 200 per litre. And some of the vegetables are going through a seasonal spike that takes them out of the common citizen’s reach. For example, potatoes are selling at over Rs 22 per kilogram, up by 26 per cent over the same time last year, and tomato prices have more than doubled to reach Rs 38.26 per kilogram.
The story of this robbery is not yet complete. Cooking gas prices – which can be directly controlled by the central government – have increased by an incredible Rs 431.50 in just one year for the domestic 14.2 kg cylinder. That’s an increase of 76 per cent. Meanwhile, the commercial cylinder of 19 kg now comes for Rs 2,397, up by 126 per cent from its price of Rs 1,059.50 last year.
Meanwhile, petrol and diesel prices continue to be jacked up by the central government. Recall that the Modi government kept the prices frozen for 137 days before the Assembly elections in UP, Punjab and other states. No sooner were these elections over, than the prices were raised successively for several days. In the past year, petrol prices have gone up by over 20 per cent and diesel prices by nearly 17 per cent, according to daily data released by the Petroleum Planning & Analysis Cell (PPAC) of the petroleum and natural gas ministry. The rise in the prices of these fuels has a cascading effect on all essential commodities since it hikes up transportation costs.
WHEAT AVAILABILITY AND PRICES ARE GOING TO WORSEN
The wheat situation is worrying because there is a looming crisis of availability – and the Modi government is blissfully unaware, or maybe it doesn’t care.
Projected wheat output has been downgraded from the estimated 111.32 million tonnes to 105 million tonnes in the 2021-22 crop year. This was announced in a press conference by the union food secretary on May 4. Last year, India produced 109.59 million tonnes of wheat. It is for the first time since 2014-15 that wheat output is expected to decline. This means that there will be a nearly 6 per cent dip in wheat output this year compared to the estimated target and a 4 per cent shortfall compared to last year. These are estimates as of end-April, the actual position may be worse.
The reason for this dip in wheat production is the extreme heat witnessed in north India in March-April which caused wheat grains in the standing crop to shrivel up and fail to reach the requisite weight. In itself, this is not too much of a cause for worry as long as the dip remains in this order. But there is more bad news.
The procurement of wheat by government agencies, which continues till June, has sharply declined in the ongoing rabi marketing season. According to media reports based on food ministry sources, it is now being estimated that wheat procurement will fall to a low of 19.5 million tonnes this year. This is a steep drop of about 55 per cent compared to last year when 43.3 million tonnes were procured. It is one of the lowest wheat procurements in recent memory, taking the level down to what it used to be in the early 2000s.
WHY THIS SHOCKING REDUCTION IN GOVERNMENT PROCUREMENT?
Reasons given by the government include lucrative export prices leading private traders to buy up wheat from farmers, holding back wheat harvest by farmers in hope of better prices and, of course, the dip in output itself.
The effect of low procurement will be that cheap wheat will no longer be available in the Public Distribution System (PDS) for needy families. Already, this effect is visible in wheat allocation for the PM Garib Kalyan Anna Yojana under which 5-kilogram free food grain is distributed to all needy families. The government has ordered that 5.5 million tonnes of rice should replace wheat in this scheme. Although it is being described as a measure to push fortified rice, it appears to be an attempt to compensate for the wheat procurement shortfall.
According to the food and public distribution department’s monthly food grain bulletin, wheat stocks in the central pool were 18.99 million tonnes in April this year, over 8.3 million tonnes or 30 per cent less than last year. As the low procurement continues, government-held food stocks will further decline. The level is still above the mandated buffer stock norms but the situation is not healthy.
The real problem lies with the way the Modi government is looking at this situation. Remember that it has not distinguished itself whenever there is a crisis. Nor does it prepare well in advance. In the last few years, the repeated shortages of coal for power plants, the terrible oxygen shortage in 2021 during the Delta wave of Covid, the fertiliser shortage during November-December 2021, and the ongoing cooking oil short supply due to falling in palm oil imports are all crises in which the Modi government’s negligence or mismanagement were starkly visible. It looks like the same kind of complacency is marking the wheat prices and availability situation.
Immediately after his return from the European tour, prime minister Modi held a meeting with top officials of concerned ministries on May 5 to review the wheat supply, stocks and export situation. He “directed that all steps be taken to ensure quality norms and standards so that India evolves into an assured source of food grain and other agricultural products” according to a press release of the prime minister’s office.
The prime minister’s advice to bureaucrats to ensure that quality norms should be adhered to shows that at the very top levels, there is more concern about the export market than internal availability. The tenor of officialdom is that there is nothing to worry about. They feel that farmers are getting prices more than MSP, the shortfall in output is very small, and despite the big drop in procurement, the stock position is still comfortable. All this is indicative of a bizarre and irresponsible complacency that India can ill afford to have.
In the coming months, this shortage of wheat could affect the public distribution system seriously. It could also affect the prices of wheat in the open market as India is still encouraging exports and about 10 million tonnes have been already exported. It is reported that 40 million tonnes of wheat are targeted to be exported.
If the export market falters, the held over wheat brought at higher prices by traders (as claimed by the government) will be routed back to the domestic open market – at higher prices. People already deprived of wheat in their ration quotas will be forced to buy up the high priced wheat from open markets.
Farmers also could get affected if the volatile export market does not materialise fully. Government procurement will close in June and subsequently, they will have to sell the wheat at whatever price they get from avaricious traders.
In short, the immediate future portends all kinds of pitfalls and dangers. With the Modi government displaying its usual attitude of brazening it out in situations of crisis, the time could be ripe for another – and more – a devastating blow to the already distressed living standards of the people.