GS Paper III
News excerpt
Although wheat stocks in the government godowns have been over and above the minimum buffer levels, they have plunged to the levels considered the lowest in the last seven years.
Seven-Year Low wheat Stocks:
- According to the Food Corporation of India (FCI) and state agencies, the godowns had 163.5 lakh tonnes (lt) of the cereal as of January 1, the lowest for this date since the 137.5 lt of 2017.
- This is a significant decline, raising questions about the adequacy of reserves to meet future demands.
- The depletion in wheat stocks comes at a time when retail cereal prices rose 9.93% year-on-year in December, 2023, which was preceded by 15 consecutive months of double-digit inflation from September 2022 to November 2023.
Sufficient wheat stock in present time
- Adequate buffer for present operational needs: The present stocks are more than the minimum buffer of 13.8 mt to meet the operational requirements of the public distribution system, plus a strategic reserve, for the next three months. By then, the new crop would start arriving in the mandis.
- Rice reserves as a compensatory measure: The government has sufficient rice stocks to more than compensate for any shortfalls in wheat. That should keep both cereal and overall retail food inflation at near double-digits now somewhat under control, at least till the national elections scheduled in April-May.
- Policy measures to ensure stability: The measures taken so far are banning wheat and non-basmati white rice exports, not permitting large retailers and traders to hold more than 1,000 tonnes of wheat, and selling grain from the Food Corporation of India’s stocks in the open market are good enough for that.
Buffer Stock
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Future challenges:
- Post-election period challenges: There are potential challenges for wheat in the future, particularly after the national elections scheduled in April-May.
- Concerns regarding upcoming crop performance: The primary concern is related to the upcoming wheat crop, due for harvesting from March-end.
- Potential supply challenge: If this crop does not perform well, it could lead to a supply challenge, creating uncertainties in meeting the demands of the public distribution system and strategic reserves.
- Post-election responsibilities for the new Government: The new government post-elections may face the task of addressing potential shortfalls in wheat production, impacting overall food security and inflation rates.
Suggested measures
- Open import window for wheat: The government should keep the import window open for wheat, similar to the approach taken for edible oils and pulses. This implies allowing the import of wheat without resorting to export and stocking controls, ensuring a continuous and balanced supply.
- Addressing farm sector policy stability: India’s farm sector, unlike industry and services, has suffered the most from lack of policy stability and predictability, impacting investments in processing, warehousing, marketing and research. Hence, proactive steps are required to address these issues.
- Shift from short-term to long-term policy Focus: The preoccupation with short-term goals has meant deploying the sledgehammer approach in response to every inflation event in onions or pigeon pea and not doing anything when prices crash. Hence, the government should go beyond short-term goals and addresses long-term policy considerations
- Prioritize a comprehensive agricultural vision: A strategic vision for Indian agriculture, going beyond food inflation, should be a priority for the next government.
Supplementary information: Conditions for wheat cultivation
Wheat Varieties:
Wheat production
Wheat exports
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