India's food surpluses remain marginal

To become a reliable exporter, India needs to adopt climate-resilient technologies and a digital system of traceability of agricultural produce

The events of the last two years show that despite India's glorious achievement in agricultural production and food security, surpluses for most agricultural commodities are marginal. The success of the green revolution and the use of technology in agriculture made India a nation surplus in some crops. This enabled India to emerge as a large exporter of rice and sugar. In the following years, wheat was also exported, although Indian wheat was mostly uncompetitive in the global market. As agricultural exports rose, the realisation from foreign trade reached $50.2 billion in 2021-22.

However, the events of the last two years show that despite India's glorious achievement in agricultural production and food security, surpluses for most agricultural commodities are marginal.

Production of both rice and wheat was adversely affected by unfavourable climatic events in the last agricultural year. The inflationary trends in the food economy were noticed much before temperatures rose unusually high in February and March 2022. This led the government to resort to unusual measures of placing controls on stocking, prices, futures trading and exports a few times over the last two years after the Covid19 pandemic set in.

Heavy rains in August-September 2020 hit onion production in Gujarat, Madhya Pradesh, Karnataka and parts of Maharashtra. That made the government ban onion exports on September 14, 2020. The ban covered premium export varieties of Bangalore rose onions and Krishnapuram onions also.

The next round of curbs came from the Securities and Exchange Board of India (SEBI). It suspended the launch of any new contract of chana on the National Commodity and Derivatives Exchange (NCDEX) on August 16, 2021 even though the market price of the grain was below the minimum support price (MSP). The market price was about Rs 4,500 to Rs 4,800 a quintal in the largest chana producing state of Madhya Pradesh while the MSP was Rs 5,100.

SEBI struck again on December 19, 2021 in the wake of rising prices of edible oils, especially mustard. It banned derivatives contracts of several agricultural commodities for one year. These included wheat, paddy (non-basmati), chana, crude palm oil, mustard seed and its derivatives, moong, soyabean and its derivatives. The ban was extended for another year on December 22, 2022.

As wheat prices climbed earlier, its exports were banned in May 2022. This was followed by restrictions on the export of atta (wheat flour), wholemeal atta, resultant atta, maida and semolina in July 2022. Approval of an inter-ministerial committee of officers (set up to regulate the export of wheat) was made mandatory for any export of these items.

The export of raw, refined and white sugar was shifted from open general license and placed under restricted category from June 1, 2022. This was done to ensure that domestic availability was not affected and sugar prices remain stable during the sugar season 2021-22 (October-September). The quota for exports was fixed at 100 lakh tonnes.

More export restrictions were announced as food inflation stayed stubbornly high. The export of broken rice was banned on September 9 2022. A 20 percent export duty was imposed on the export of non-basmati rice (including brown rice, semi-milled or whole-milled rice). However, the export of basmati rice as well as non-basmati parboiled rice was exempted from this duty. One reason for banning the export of broken rice was to ensure its availability as raw material for Ethanol Blending Programme (EBP). Restrictions on the export of organic non-basmati rice, including organic non-basmati broken rice, were eased on November 29, 2022.

The export of sugar will continue to be restricted in the 2022-23 sugar season. The sugar export policy for 2022-23 announced on November 5, 2022 has permitted the export of 60 lakh tonnes of sugar till May 2023. This quota might be increased if the sugarcane crop and recovery of sugar are good.

India's dependence on imported edible oil has remained at around 65-70 percent. In the oil year 2021-22 (December-November), India imported 140.3 lakh tonnes of edible oil, up from 131.3 lakh tonnes in 2020-21 and 131.8 lakh tonnes during the oil year 2019-20. However, due to a huge increase in global prices on account of pandemic-led disruptions, Russia's war on Ukraine and the devaluation of the Indian Rupee, the value of edible oil import jumped from Rs 71,625 crore during the oil year 2019-20 to Rs 1.17 lakh crore in 2020-21 and then to Rs 1.56 lakh crore during 2021-22 (November-October).

From the above, it is clear that India's surpluses are vulnerable to climatic conditions and exports will be restricted by the government if domestic food security is under threat and food inflation is high. Sometimes, the decisions to restrict or ban exports of agricultural produce will undoubtedly prove detrimental to the interest of farmers, as the market prices fall when such restrictions are imposed. But no government can compromise food security in the domestic market.

The Agriculture Export Policy, 2018 promised to avoid bans on organic produce and processed food. Yet, the export of wheat atta, semolina and even organic rice was banned (September 2022). Several Indian food companies that have invested heavily in developing export markets for processed food may have lost some of those markets due to such bans. For example, the retail stores in Singapore are now stocking wheat atta sourced from the United Arab Emirates and Australia. The expatriate population prefers Indian products but is forced to buy such food items produced in other countries.

In order to shield itself from restrictions on rice exports, Bangladesh recently entered into a contract with the National Consumer Cooperative Federation for the import of 2.5 lakh tonnes of parboiled rice at $443 per tonne. They could have bought 50,000 tonnes of this rice from a private exporter at $393.90 a tonne, but they preferred NCCF as they expect the cooperative federation to be exempted from export bans in future.

Agriculture exports shield farmers from low domestic prices. India has the world's largest arable land and the second-largest irrigated land area but the productivity of crops is low and surpluses for exports are not consistent and reliable. To become a reliable exporter, climate-resilient technologies have to be developed and a digital system of traceability of agricultural produce put in place.

Even as we sign more free trade agreements (FTAs), developed countries will insist on higher standards of chemical residue limits and traceability. We have seen this in the case of exports of basmati rice to the European Union and other countries. Harnessing India's export potential for agricultural produce needs more attention and consistency than what we have devoted so far.

Siraj Hussain is a retired Union Agriculture Secretary. He is currently Advisor, Food Processing, FICCI. Views are personal and do not represent the stand of this publication.