Why low rice, wheat and sugar stocks shouldn’t prompt India to curb exports

Rice, wheat and sugar are agricultural products for which India’s production for much of the past decade and more has exceeded its consumption requirements. This led to stock overflows and the country also became a major exporter. In 2021-22, rice exports alone were valued at $9.7 billion, with sugar and wheat accounting for $4.6 billion and $2.1 billion respectively. But these surpluses suddenly seem like a thing of the past. Public wheat stocks on September 1 were at their lowest level in six years on that date. Mills will start the new sugar season from October with carryover stocks that are the lowest in five years. While the rice situation is relatively comfortable, there are questions about the size of the current kharif crop, given insufficient monsoon rains in the Gangetic plains and reports of a new virus causing stunting plants in many parts of Punjab and Haryana. Additionally, low wheat stocks mean additional pressure on rice to supply the public distribution system.

It is not for nothing that the Narendra Modi government is worried, especially with annual consumer food inflation at 7.62% in August and 9.57% for cereals. In mid-May, it completely banned wheat exports. Last week it did the same for broken rice, in addition to imposing a 20% duty on all other non-parboiled non-basmati shipments. Sugar exports moved from the “free” list to the “restricted” list on May 24, with a total quantitative limit of 10 million tonnes (mt) set for the 2021-22 season, which was later raised to 11 .2 mt. While the new season is due to start from next month, the government has yet to announce a quota. According to an article in this newspaper, it could initially authorize 5 tonnes of exports – half of last year’s – and call for other quantities after February. Simply put, after the wheat fiasco, where the loss of production due to the March heat wave was seriously underestimated, it does not want to take a risk in rice and sugar.

That said, one should not lose sight of the basic fact that all three commodities are prone to structural oversupply, as opposed to occasional supply problems of the current kind. The case for reducing acreage and encouraging farmers to plant more oilseeds, pulses and other less water-intensive crops remains as compelling as the need to provide dietary diversification from calories to foods. rich in protein and micronutrients. The Modi government should persist in the policy of conservative increases in the minimum support prices of paddy, wheat and sugar cane and lift the current restrictions on exports as soon as possible; where appropriate, customs duties may be imposed instead of quantitative restrictions. With smart inventory management, this supply challenge shouldn’t last.

Rachel J. Bradford