The Cereal Killer

AFTER ‘luxury goods’ like petrol and LPG, it’s the turn of the common man’s staple diet—wheat. While ration shop prices have remained steady for almost three years now, market prices of wheat and wheat products like atta, maida, sooji and bread/cake are soaring. From Rs 6-7 per kg three months ago, atta is now ruling at Rs 9-10 and a pound of bread now costs Rs 6-8. More important is the question: Is this the end of the price spiral, or will atta and bread become dearer still? "We’re really worried about the rise in food prices, especially wheat prices which have gone up by more than 25 per cent," admits Y.K. Alagh, Minister for Planning.

From all available indications, the price trend may be rolling on. The food and civil supplies ministry has few answers to give about a situation which is largely of its own making—a trend of rising procurement prices, coupled with a hike in open market prices in September. Restricting himself to the obvious, Food and Civil Supplies Minister Devendra Prasad Yadav lists two reasons for the sudden price rise: a sharp drop in wheat output last year and the resultant hoarding of wheat grain by traders with an eye on shortage and therefore price hike. At his meeting with the Delhi Food Minister on December 4, the first of the meetings planned with states to discuss ways to check the price rise, Yadav came down strongly on hoarders and blackmarketeers, threatening action under the Essential Commodities Act.

The ham-handed way in which the Agriculture Ministry dealt with the 1995-96 output figures, ultimately causing a scaledown of GDP growth estimates, may have contributed much to the price situation. It was only in September that it came out with the final figures, which revealed that rice output was 1.7 million tonnes (mt) less than the figure of 81.1 mt in 1994-95 and wheat production, 62.6 mt, a good 3 mt lower. This was a major letdown from preliminary estimates of 65.2 mt for wheat in February and even the first revised estimate of 64 mt in July. At that time, wheat was already ruling dearer because of the sharp hike in petrogoods prices.

A smaller crop has led to an even lower procurement, a loss of almost 3.5 mt. (The marketing season for wheat begins in the next fiscal year—from April to March, with stocks procured over April-June). Senior sources in the ministry admit to a tight stock position at present. The current stocks with the Food Corporation of India (FCI) fall short of the minimum buffer norm of 10.6 mt for October-December by about one mt as on November 1, compared to 11 mt a month ago. Ironically, the total foodgrain buffer is at a plentiful 21.2 mt, with record rice procured this year.

Both ministry and FCI sources insist that the stock is enough to meet demands up to March 1997. The FCI argues that the lower offtake of 5 mt over April-October, compared to allocation of 6 mt, is proof enough. It has even decided to publish weekly stock and offtake figures for consumers. But doubts persist. For one, the ministry’s own decision to raise open market sales of wheat to depress prices, from four lakh tonnes (lt) till September, to five lt in October and six lt from November onwards will cause an even bigger drain on the depleting reserves. And that’s the only measure it’s taking, whose success is yet to be proved, with experts considering it as the sole cause of foodgrains reaching unscrupulous hands.

 Secondly, raising sales after the open market prices were raised in September by a uniform Rs 35, (resulting in prices ranging from Rs 490 per quintal in Delhi and Rs 560 in Belgaum) can only mean costlier grain for the consumer. Those in the south will fare even worse. Ministry sources attribute this to transport bottlenecks, which only strengthen the blackmarketeers’ hands. The Public Distribution System (PDS) has ceased to be a viable option. Ration shop supplies are like a colander—very little of the meagre offtake reaches the targeted. With the central issue price of wheat at Rs 402 per quintal since February 1, 1994, a diversion of PDS grain to the open market is lucrative.

Last year marked a record procurement after the minimum support price was sharply hiked from Rs 305 in 1993-94 to Rs 350 in 1994-95, and the FCI’s inability to hold stocks beyond a certain point had forced a staggering 6.5 mt of open sales. This led to a small fall in market prices. The hike in procurement prices was smaller the next year, leading to a fall in output. For 1996-97, again, the output is expected to be bumper, with support prices raised by 15 per cent to Rs 415 a quintal. And the wheel of fortune will turn for the consumer and hoarders alike.