- Jan 23 2017 05:46:08PM
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The import duty on wheat has been recently slashed to zero. The critics and many farmers’ unions have denounced the step as anti-farmer and in the favor of big MNCs. Nonetheless, if we devolve deeper into the issue and correlate the same with food security and de-growth in production in the last two draught years, the step seems to be rational and justified.
The rationale put forward by the government in the favor of the decision is that it’s a serious attempt to improve the availability of wheat and wheat based product in the domestic market. Soiled wheat production because of below normal south-east monsoon can result in supply side constraints and inflationary tendencies. As per the official estimates, due to abnormal monsoon the country is marred with the deficit of about 1 million tonnes. This step can effectively put a check on rising prices of wheat by mitigating the supply side constraints and shortages. Examining the facts, at the end of last year’s Rabi season, wheat cost was Rs. 1,600 per quintal. By the end of this year’s Rabi season (October-March), the prices surged to Rs. 2,100-2,150 per quintal. To reverse these inflationary tendencies the import duties have been nullified with an immediate effect inviting more imports. Thus, the zero duty is advantageous to consumers with immediate effect and especially for the bulk of population of north and eastern India for whom the wheat is the staple food and quintessential for food security.
According to the critics and various farmers’ Union, the government has succumbed to the pressure tactics of the foreign agro-MNCs and their lobby. Some of the critics are of the view that this move will have catastrophic impact wheat farmers’ income, who are already feeling difficulties in sowing of Rabi crops because of cash crunch caused due to demonetization. These critics have also highlighted that sowing of wheat was delayed due to the sudden cash-crunch faced by farmers. The exposure to the international competition introduced by the zero-tax on wheat import renders the trade unfair. According to them, this decision shall prove to be a big blow for Indian farmers as they would be discouraged from bringing additional area under wheat this year due to the possibility of a price fall. As farmers are normally encouraged to sow crops that fetch higher prices during the sowing season. But, the actual facts and ground realities are totally against the perceptions and fear of the critics. The cultivation area of Rabi crops has seen a growth of 14% in the current year vis-a-vis previous year. Based on these figures it is estimated that the aggregate wheat production in the country for the coming harvest season would be 93.5 million tonnes as against the country’s annual consumption of about 87 million tonnes. Thus, the apprehensions related to reduction in domestic wheat production due to the impact of the altered market forces driven by duty cut seems to be miscalculated
Now the pertinent question that arises here is that if wheat sowing has not been impacted by demonetization and the area of cultivation has rather increased and there are no other indications that wheat production will be down in the ongoing season, then why is the government allowing import of duty-free wheat? The answer to this question is India needs wheat till its own harvesting begins in mid–February or beginning of March. In this context the slash of import duties is a welcome step. Historically, the government has protected farmers by changing the policy frequently. So, it can levy import duty again once the domestic harvest will be in the market.
Policy making should be viewed as dynamic concept that is responsive to the exigencies and ground realities. No policy remains stagnant forever, the same holds good for the import duty cut on the wheat. Let’s hope that the interests of the farmers and other stakeholders would be protected, once the new harvest hits the market.