India needs to fix its procurement policy and its granaries infrastructure to really make use of its bumper wheat harvest
India is growing more wheat than it ever has. That may sound like very good news given the fact that India (along with China) is the largest consumer of wheat, but the fact is, it does not quite know what to do with it.
India doesn’t have policies that will allow the country to use the wheat efficiently. It doesn’t even have enough place to store it. There is also no surety that wheat production will be equally robust in the coming years.
The current state of plenty is just two seasons old. Following the bumper harvest (80.17 million tonnes) of 2010, the country is now looking at another 81.74 million tonnes in a harvest season that has just begun.
“The last couple of years, we have had a good monsoon and hence the production was good. But if we have even one bad monsoon, we will have a shortage,” says Anjani Sinha, MD and CEO of the National Spot Exchange.
These bumper harvests are the outcome of a two-pronged government approach of banning exports, and raising the minimum support price (MSP) as an incentive to bring more land under wheat cultivation.
The gains at the height of the Green Revolution in the 1970s and 80s — riding on the back of high-yield seeds and pesticide use — have been slowing down. Between 2000 and 2010, the land under wheat cultivation grew by just 1.21 percent and there was a drop in yield (compared to the 1980s). Wheat production had fallen to 9.23 million tonnes in 2006-07 and export was banned in October 2007.
However, such an approach doesn’t provide sustained support for wheat farming.
One part of the problem, says Madan Sabnavis, chief economist at CARE Ratings, “lies with the procurement system. Any farmer can sell any amount of wheat to the government and the government has to buy it. The MSP too has been raised to an unreasonable level as it is a political issue.”
(This story appears in the 22 April, 2011 issue of Forbes India. To visit our Archives, click here.)