While everyone from the Planning Commission down talks about the urgency of increasing agricultural production, nobody has done anything about it. The politicians simply try to get away with it by blaming nature's vagaries, while hiding their own failure to anticipate the crisis.
The sharp increase in the prices of foodgrains, edible oils, petroleum products and metals, for whatever reasons, could not have occurred at a more awkward time for the Manmohan Singh Government. Already fighting on several fronts, it is also to prepare for the crucial elections to the state assemblies and Parliament in less than a year. The Bharatiya Janata Party, with its new prime ministerial candidate, as also the United Progressive Alliance's supporting Communist parties have already embarked on their election campaigns by using price rise as a handy issue to derive the maximum advantage from the Government's discomfiture.
The people in general feel that the Government relied too much on the free market to moderate the price rise and failed to take advance corrective measures to mitigate the adverse impact of international, as well as, domestic factors which have pushed up the consumer price index. The pro-market economists and advisers to the government are in a happy position of not having to face the electorate and are, therefore, least qualified to assess the political costs to the government of any misplanning or failure to act in time.
The public also was not taken into confidence regarding the unavoidable impact of global factors, such as, escalating oil prices that have crossed $ 118 a barrel and world food shortages in order to prepare them psychologically for the new situation. More assurances of the situation being "under control" and no physical shortage of wheat and rice have not helped calm down frayed tempers. Those on the margins, who have to cut down even on their measly cereals intake, are in no mood to listen to long-winded explanations and are easily carried away by the Opposition slogans about the government's inability to deal with the crisis. Some measures have, no doubt, been initiated but, unless food output this year is substantially higher than that of the last three years, the shortages will persist and the public mood remain angry.
Inflation has many causes. The first, and the foremost, foodgrains, pulses and oilseeds production has not keep pace with the increase in the population and rising incomes. The price of steel has gone up due to the increase in the cost of inputs like iron ore and coking coal. In the absence of remunerative prices for their produce, the farmers have shifted to cash crops, or simply sold their land to town developers and industrial houses. The erstwhile Atal Bihari Government, which saw "India Shining" all over, said the trend was welcome and while the country industrialized, exported and prospered, it would import food from abroad. It dismantled the public distribution system under pressure from its mainstay -- the food-grain traders and corporate houses, some of whom also deal in large-scale procurement and distribution of foodgrains and edible oils in retail.
The off take of foodgrains rose on account of commitments under the various Rozger schemes and free mid-day meals schemes introduced by many state governments. The Green Revolution having run out of steam, foodgrains production has remained more or less stagnant during the past decade, while demand has increased due to a variety of factors. While everyone from the Planning Commission down talks about the urgency of increasing agricultural production, nobody has done anything about it. The politicians simply try to get away with it by blaming nature's vagaries, while hiding their own failure to anticipate the crisis and rebuild the minimum national food buffer stock, started by Indira Gandhi, to provide insurance against adverse climatic and other factors.
Nobody is advocating going back to the era of controls and monopoly food procurement. But, anticipating shortages, the Government is within its powers to impose temporary movement restrictions to enable the FCI to procure enough to build a stock of at least 20 million tonnes. Hoping to correct the situation at this late stage, the Government has passed on the responsibility to the states, which are expected to diehard foodgains and edible oil stocks to bring down the prices. It has warned them to keep track of private players in "mandis" across the country. This is done in the belief that it might work for the Centre, which is facing several assembly elections this year and the big show next year, to push onus on the states for mismanagement and inflation, put the need to build a sufficient reserve to deal with crisis situations remains strong.
Some of the steps announced will not impact in the situation immediately and state governments, particularly those run by the BJP, which are due to go to the polls this year, refuse to accept the blame and hold the Centre responsible for not importing and supplying and have blessed Mr. L. K. Adwani's anti-prices rise agitation against the Centre. They also insist that an integrated policy to boost agricultural production has not been formulated by the Centre and not much attention paid to extending irrigation, providing cheap farm inputs and credit to the farmers through cooperative and other institutions and assured remunerative price for the produce.
Even though the Prime Minister, Food and Agriculture Minister and the Planning Commission keep talking about a second Green Revolution, there are no signs of it yet in the making. The entire approach is ad hoc, of relying on imports at whatever cost and not encouraging the farmers to produce more and secure remunerative prices. Even though the Vajpayee Government played havoc with the food procurement, import and distribution system, it is the responsibility of the UPA Government to correct past mistakes, rehabilitate agriculture and add to the farmer's income.
The decision to build a strategic food reserve of five million tones, in addition to the buffer stock, is a correct one though it will take a year or two to do so and the impact on the situation will not be immediate. The reserve will be met from the surpluses of domestic stocks after meeting buffer norms and though weekly or fortnightly imports. This is to ensure that there is no cartelization and artificial jacking up of international prices, as happened in the case of wheat last year. The appointment of an Oversight Committee to monitor imports is meant to pro-empt criticism over procedural irregularities, as well as, excess payments. India could not import enough wheat in the past two years because international prices shot up due to crop failure in Australia, a major wheat exporter. The exporting rice south-east Asian countries also had less to offer and their surpluses are the lowest in recent years.
The government cannot, however, do merely with 10 million tones of wheat and rice in stock, which should be at least 20 million tones to meet the needs of the public distribution system and to regulate the markets. As Finance Minister P. Chidambaram has said, inflation is going to stay for a while. The country is importing inflation when it imports crude oil, palm oil, urea and other items. The inflationary trend would continue globally unless countries acted together to contain prices. That does not look like happening. Iranian President Ahmadenejad says that oil even at $ 200 a barrel would still be "cheap". That being so, an increase in the domestic production of food grain and edible oils alone would mitigate the hardship caused be rising oil prices and prevent the nutritional level of the people from falling further.
Hope rests on the anticipated bomber crop of 75 million tones of wheat materializing, which will make it possible to build the required buffer stock and ease the price pressures. The global food crisis has revealed market failures at every link of the food chain. Any new approach ought to address the long-term problems that are holding the poor farmers back and depressing production. There are some hopeful sings though, with winter wheat sowing in the United States up by four per cent and the spring sown area is likely to rise more. The UN Food and Agriculture Organization forecasts that wheat production in the European Union will also increase by 13 percent. There is no firm estimate about Australia as yet.
The plan to increase indigenous production should comprise new high-yielding varieties, cheap inputs and assured irrigation. The Government should also consider ban on forward trading to stabilize prices. The World Bank also has warned of a "relatively long period of elevated prices, in metals, in food and oil". The Government has been warned enough, as these developments could stall, or even setback the progress made in reducing poverty over the last decade, while heightening political tensions.
MK Dhar, NPA
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