Dec 13, 2009

Importing wheat at a time of glut

India's food (mis)management has never been so grotesque. In fact, I have always been baffled by the ad hoc decisions that are taken just to satisfy the demand of various lobbies, and without caring for any long term policy imperatives. And more often than not, such ad hoc decisions create unforseseen problems.

At a time when India is saddled with huge wheat stocks (it had 25.2 million tonnes of wheat stocks on Sept 1, more than double the PDS requirement of 11 million tonnes), I do not understand the need and urgency to allow wheat imports to southern States. I am aware the millers in Karnataka, Tamil Nadu, Andhra Pradesh and even Assam and West Bengal have been pressing the Ministry of Food and Agriculture to allow imports since the price of imported wheat at ports is relatively cheaper than the wheat stocks moved from northern India.

So while India allows wheat imports to meet the requirement of the wheat millers in southern parts of the country, the surplus in north India is mopped by the private trade and the giants in food trade including Cargill, ADM and ITC. And do they provide you wheat at cheaper prices?

If you have been lately to the food retail outlets to buy Aashirvaad brand of wheat atta (marketed by ITC), you will be shocked to read the prices. The Grade 1 atta costs Rs 35 a kg, and the grade II costs Rs 25 (as written on the pack) but is available at roughly Rs 19 a kg. Now why should ITC be allowed to charge such a high price for wheat atta is hard to fathom.

Wasn't ITC always claiming that food retails will help to squeeze out the middlemen, and that will benefit the farmers as well as the consumer? If this is how the ITC is benefitting the consumers, I wonder what name can be given to exploitation.

Anyway, coming back to wheat imports, news reports state that wheat prices have shot up by Rs 80 or so in the past few days in southern India. On Tuesday, wheat prices were ruling between Rs 1610-1615 per quintal in Coimbatore, Bangalore and Mysore. This is because the imported wheat from Australia is coming at a higher price, Rs 1540-1550 per quintal. By the time the imported stocks reach the mills, the price touches Rs 1630-1640.

The same wheat flour mills which had been pressing the government to open up imports, are now planning to file tenders before the Food Corporation of India (FCI) to seek grain under the open release. FCI's wheat costs Rs 1590.86 in Karnataka, 1585.17 in Tamil Nadu, and Rs 1563.99 per quintal in Andhra Pradesh in December. The FCI has already announced open release of 500,000 tonnes of wheat between Sept-December. The reserve price of wheat with FCI is Rs 1437.90 a quintal.

The wheat flour mills in souther India have so far contracted for 18-20,000 tonnes of wheat from Australia.

Even if the quantity allowed for imports is low, there is no justification for opening up the domestic market for imports. This is primarily the reason why much of the wheat procured from the northern parts of the country rots and has to be carried over for a number of years.

Wheat can only be cultivated in northern parts of the country, and that is why the problem with its frieght charges to distant places in south India.

Now if this is not enough, the Ministry of Commerce & Industry has allowed the export of organic wheat and rice. Quietly a notification has been issued to this effect. The export of organic wheat and rice was banned in 2007 and 2008, respectively. Non-basmati organic rice exports are allowed to a maximum annual limit of 10,000 tonnes, while for organic wheat the upper limit is 5,000 tonnes.

Once again, I don't understand the logic of exporting organic wheat and rice. I fail to understand why organic wheat and rice cannot be made more popular in the domestic market? I am sure Indians would love to pay a higher price for organically produced safe food. In any case, if the gullible consumers can pay Rs 35 a kg for ITC's Aashirvaad atta, which they claim is procured from Madhya Pradesh, the price of organic wheat too would be in that range.

Look at what ITC claims:

Aashirvaad Select 100% MP Sharbati atta comes from the plush, fertile soil of Madhya Pradesh, tended by the right amounts of sunshine and rainfall. The land here truly sprouts gold. The gold that we call ´sharbati´. The ´sharbati′ wheat is sourced directly from farmers through ITC′s e-choupals and then blended using the traditional ´chakki-grinding′ method to give you that superior, discerning taste that you well deserve.

MP Chakki Atta: Aashirvaad MP Chakki Blend is made only from the finest MP wheat. This wheat is again sourced through ITC′s e-choupals from the golden fields of the most carefully cultivated wheat.

Whole Wheat Atta - 0% maida and 100% Atta: Aashirvaad Whole Wheat Atta has 0% maida and 100% atta. This means you serve soft, fluffy rotis and a whole lot of health and happiness.

I thought the whole purpose of setting up a network of e-chaupals was to make grains cheaper for the consumers besides of course providing a remunerative price to growers.

However it appears, India is keen to grow safe and healthy food for people living outside the country, whereas for its own population it literally provides unhealthy grains which often meet cattle feed standards.

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