WHEAT CRISIS IN INDIA

 India is the second-largest producer of wheat in the world, with China being the top producer & Russia the third-largest and Ukraine is the world’s eighth-largest producer of wheat. But this year, production has been less than usual. The Centre has lowered its wheat production estimates by 5.7% to 105 million tonnes from the projected 111.32 MT for the crop year ending June.

Wheat procurement by government agencies is also expected to be only half of the target set for this season. Unprecedented heat waves across the north, west and central parts of the country, have caused substantial loss to the yield this year.  

The production is expected to fall on account of unusually warm weather conditions that persisted during March to April in most parts of the key grain-producing States of Punjab, Haryana, Madhya Pradesh as well as Uttar Pradesh. Unprecedented heatwaves in March & April being the hottest in over 100 years, have caused substantial loss to the yield at 6%, with 20% of the wheat grain shrivelling up.

Some estimates say nearly 80% of the crop purchased by the government has shrivelled up. The “early summer” in states like Punjab, Haryana & Uttar Pradesh has also affected crop yields. According to crop cutting experiments, conducted by the Punjab Agriculture Department every year, the State’s yield per hectare could have fallen 5-10% compared to last year’s yield. 

Food Secretary Sudhanshu Pandey, attributed the lower estimates to “early summer” affecting the crop yields in States, especially Punjab, Haryana and Uttar Pradesh. As for the area under wheat cultivation, the weekly data report (of January 14, 2022) from the ‘Ministry of Agriculture & Farmers’ Welfare’ shows two significant changes.

 First, the area under wheat cultivation declined by about 1.25 per cent from 34.07 million hectares in 2020-21 to 33.65 million hectares in 2021-22. This has been accompanied by a 24 per cent increase in the area under cultivation of rapeseed & mustard, from 7.3 million hectares in 2020-21 to 9.05 million hectares in 2021-22. Rapeseed cultivation has increased because of the recent rise in prices of imported oils.

Wheat procurement in the last winter (rabi) marketing season too had seen a drop. In the last marketing year, the government had purchased 43.3 MT of wheat from farmers, and this year it had set a target of 44.4 MT. A report by the World Food Programme, which said the “unfolding war in Ukraine” was likely to “exacerbate the already severe 2022 acute food insecurity forecasts”. UN Secretary General Antonio Guterres said that the war in Ukraine is “supercharging” a three-dimensional crisis — food, energy & finance.

According to The 2022 Global Report on Food Crises , globally, levels of hunger remained alarmingly high. In 2021, they surpassed all previous records as reported by the Global Report on Food Crises (GRFC), with close to 193 million people acutely food insecure and in need of urgent assistance across 53 countries/territories. This represents an increase of nearly 40 million people compared to the previous high reached in 2020.

 In 2021,  70% of the total number of people in crisis were found in ten countries/territories: the Democratic Republic of the Congo, Afghanistan, Ethiopia, Yemen, northern Nigeria, the Syrian Arab Republic, Sudan, South Sudan, Pakistan and Haiti. In seven of these, conflict/insecurity was the primary driver of acute food insecurity. Bangladesh imports 10.7% of its total imported food commodities from the Russian Federation and 4.5% from Ukraine. It is one of the world’s biggest wheat importers, buying around 6 million tonnes annually, chiefly from India, Canada, the Russian Federation and Ukraine.

Private traders are buying wheat in bulk in higher prices than the  minimum support price (MSP). Private traders are buying wheat in bulk from farmers in expectation of rise in price due to higher international prices of wheat after the Russian attacks on Ukraine. 

 In Madhya Pradesh, Uttar Pradesh, Rajasthan and Gujarat, farmers are selling to traders-exporters at prices (₹21-24 per kg), which is better than the MSP (rate of ₹20.15 per kg).Also, farmers are holding on to some quantity of wheat, expecting higher prices for their produce in the near future.

Food secretary admitted that the substantially low procurement was due to market prices of wheat being higher than the MSP being offered by the government. He gave two other reasons for the low procurement: stocks being held by farmers and traders in anticipation of further price rises, and lower production. The large revenues of the previous year caused a steady shift towards increased mustard cultivation this time, at the cost of wheat. It contributed  to wheat crisis in India recently. 

There is no clear information available about who is buying wheat in Uttar Pradesh. This is because local Arhtiyas (middlemen) contact farmers and offer them prices over the MSP. Moreover, payment is made as soon as the wheat is picked up, whereas a farmer is paid within five to ten days after selling the wheat at a government centre .

IMPACT ON PUBLIC DISTRIBUTION

The country will require 36.51 MMT of wheat for various welfare schemes. Until April 28, 2022, the government has been able to procure about 15.69 MMT and anticipates that it will get approximately 19.5 MMT in the entire Rabi season. The government will thus have 38.5 MMT of wheat by the end of the Rabi procurement, which is merely 2 MMT more than what is required for various schemes in 2022-23. 

The government will thus not be able to maintain the required buffer stock of 7.46 MMT. Given the grim situation surrounding wheat, the government is likely to further tighten the “targeting” of the public distribution system. Besides, the private market price of wheat is likely to rise. Both these factors will have an adverse effect on consumers. 

Wheat procurement is undertaken by the Food Corporation of India (FCI) & other agencies at MSP to meet the requirements under the Public Distribution System (PDS) & other welfare schemes such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). 

The government has revised the grain allocation under PMGKAY for May to September 2022. Accordingly FCI will fill the gap left by wheat with an increased allocation of rice. An additional 5.5 MT rice is being allocated to the States to fill the gap in supplying wheat grain. According to food secretary ,rice procurement last year was about 60 MT and this year a similar quantity is expected. Under the National Food Security Act (NFSA), he said the annual requirement is roughly about 35 MT.

As for international food prices, the Food and Agriculture Organization of the United Nations, said that even before the war, prices had reached an all-time high due to market conditions and the high prices of energy, fertilizers and other agricultural services. Given the fall in the output of wheat and the decline in profit margins because of higher input costs, one anticipates a sharp fall in the incomes of farming households, especially of small and marginal farmers. Added to this crisis is the reduced quantum of crops reaching mandis, which in turn has reduced employment opportunities for mandi workers and palledars.

Data from the FCI website points to three key factors in distribution and stock-holding. First, the FCI had a wheat stock in 2021-22 that was approximately 3.5 per cent higher than the required buffer stock of 7.46 MMT. Second, the actual distribution of foodgrains was about 8 per cent lower than the corresponding allocation under the NFSA in both 2020-21 and 2021-22. Third, a principal cause of reduced stock-holding of food grains has been because of open market sales rather than distribution under welfare schemes. The FCI seems to have sold wheat in the open market, which was then exported by private traders.

To avoid this predicament, the government must engage in an alternative set of policies. First, stock-holding limits of wheat and other food grains for private traders should be effectively administered. This will ensure that domestic food security is not compromised in the current year. Along with this, to secure the next harvest, the MSP must be raised adequately to compensate the farmer for higher input costs.