Perils of status quo

THE CENTRAL GOVERNMENT'S short-sighted farm price policy continues with the decision to raise the minimum support price for paddy in 2001-02 by Rs. 20 a quintal, which is double what was recommended by the Commission on Agricultural Costs and Prices. This is sure to result in rice procurement that will be higher than the 2000-01 record of 18.5 million tonnes. With the Government yet to decide on any radical solution to deal with cereal stocks of 62 million tonnes (25 million tonnes of which are rice), the implications of a higher support price and larger procurement this year are self-evident. By the time wheat from the rabi crop is ready for procurement next April, the Government may well be sitting on stocks of over 70 million tonnes of rice and wheat.

The Centre may claim that the Rs. 20 increase demonstrates that it has drawn the line on demands for an even higher support price. But that is an indefensible explanation for continuing with the status quo in support prices. Punjab, which is due to go to the polls shortly and is governed by the Akali Dal, a constituent of the NDA, did indeed lobby for an increase in the procurement price of as much as Rs. 50 a quintal. And as expected the State unit of the Congress has already criticised the new procurement price as too little that has come too late. But the economic and social catastrophe that is building up through the accumulation of food stocks calls for a substantively different approach to Government procurement and distribution; not the kind of compromise appeasement that the Centre has now indulged in with what only it will call a moderate increase in procurement prices. What we are now witnessing is the institutional replacement of the market by the Food Corporation of India in the surplus-producing States. The Government is no longer conducting support operations in these regions, it has instead become the preferred buyer of both rice and wheat. Until 1998-99, the Government was procuring between 25 and 30 per cent of the paddy that was sold on the market in the whole country. In 2000-01, the proportion had risen to more than 35 per cent and the ratio is likely to rise even further with the new support prices. A similar trend is taking place in wheat and both have contributed to the buildup of the present 62 million tonnes of cereals. Rice stocks of 22.5 million tonnes are today not just twice the buffer norm for this time of the year; they also exceed the total amount of global trade in this cereal and India's stocks are the second largest in the world after those of China. The situation is worse in wheat where India's stocks are the largest in the world and exceed what Australia, Canada and the U.S. together possess.

Criticism of the annual, ad hoc and substantive increases in procurement prices are often seen wrongly as being ``anti- farmer''. This is not the case, for, while farmers do need remunerative prices the Government's farm price policies have tended to benefit only certain crops grown in certain areas. Besides, an excessive reliance on crop prices has meant the neglect of farm productivity and investment in agriculture. Reversing the trend and boosting farmers' incomes through higher productivity at lower costs cannot be done overnight. But the effort would have to begin at some point and the decision on the minimum support prices for the kharif crop of 2001 would have been a suitable occasion to signal that Government policy was moving away from the past dependence on prices to raise farm incomes. That has not happened. With the Centre unable to break with the past, one can only await with trepidation the decision on the support prices for wheat from the rabi crop of 2001-02.

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