FE Editorial : Wanted: An agri policy

If the bans were because of a grain shortage in the country, that would still be excusable at one level. But this is clearly not the case and, against the stipulated reserve stock of 212 lakh tonnes in October, reserves are at a whopping 666 lakh tonnes. According to Gulati’s calculations, the bloated excess stocks (as on July 1) added up to a cost of more than R1 lakh crore (that’s 1% of GDP). What makes things even worse is that, CACP’s rabi report points out, government policy is even driving out the private grain trade almost completely—apart from lowering efficiency levels in the trade, it also means the government’s costs rise dramatically as it has to procure all the foodgrains in the market. Government distortions range from very high local levies in states like Punjab and Haryana (around 10% of total food subsidy is spent on taxes in these states) to states like Madhya Pradesh offering additional bonuses that ensure private traders are completely priced out of the market—in major states like Haryana, Punjab, Uttar Pradesh and Madhya Pradesh, nearly 95% of all wheat arrivals in the mandis are bought by government agencies. Things have got so bad, CACP has recommended the Competition Commission of India be asked to look at such anti-competitive market behaviour that has led to a complete collapse of competition in wheat markets. But even before that, the government needs to take action since continuing with the current erratic policy can quickly put an end to the booming agri-exports trade.