Bright prospects of rabi crops have brought cheers to the government after a deep setback to agriculture during the last kharif season due to severe drought followed by floods.
It is likely that most of the rabi crops would outperform this year compared to the previous one. For example, wheat, the most important rabi crop, is likely to break all-time records. There are forecasts that wheat production in 2010 may exceed 82 million tonne from about 28 million hectare as compared to 80.6 million tonne from 27.8 million hectare in 2009.
Similar higher production forecasts have been made for rabi rice, rabi maize, gram (a major pulse crop), potato, onion, vegetables (like tomato, green peas, cauliflower, and cabbage, etc). However, the record production of the majority of rabi crops, it may not compensate the loss incurred in production during the kharif season. The foodgrain production during kharif season was nearly 18 million tonne less compared to 2008-09. But higher rabi production has brought some respite to the government as rabi crops account for half of the total foodgrain production.
There were a number of factors that contributed in higher production of rabi season crops. The most important one was the farmers? response to higher prices. Wholesale prices of all food commodities were rising during the sowing time. Minimum support prices of most food commodities were increased. Improved varieties of seeds of wheat and pulses (especially of gram) were made available in important production centres. Luckily, weather was also favourable this season for higher production.
Expected higher production should necessarily dampen the prices of essential food commodities. The wholesale price index of the most of food commodities is showing a declining trend since January 2010. Marked fall in wholesale price index of potato was witnessed from 278.2% on January 2 to 176.3% on March 20. Same is the case for onion; from 375.8% to 255.8%. The big question is how significantly these important food commodities would ease inflationary pressure on food articles, because their share is merely 1.96% in all commodities, and about 13% in the overall food basket.
This implies that although the prices of these rabi season food commodities would fall with their arrival in the market, it may not necessarily ease overall food inflation. Alternatively, such high production may lead to a problem of a different kind for government and policy makers.
In case of wheat, the worry is bulging food stocks. It is expected that higher wheat production would result in higher procurement. Though the government is targeting procurement to the tune of 24 million tonne, it is expected to exceed the previous year?s record procurement (25.38 million tonne).
Most likely, the wheat stocks with the government after procurement would exceed 40 million tonne, which would be nearly half of the wheat production. The problem of storage and also of liquidating stocks would be a major concern for the government in the coming days. Since global wheat production has increased by 20 million tonne as compared to last year, exports are also not possible without subsidies.
The efforts of increasing production by the government without appropriately managing the supply chain would not bring the desired results, but would instead lead to wastage and losses.
It is therefore, necessary that production strategies must be integrated with the markets so that the benefits of higher production reach producers, consumers and other stakeholders.
Views are personal