Dealing with Surplus Scenario

What is the issue?

• India has moved from famines and agricultural shortages to surpluses.
• This demands a shift in the policy approach to balance among production, consumption and farm income.

What are the recent developments?

• The country produces more food than it can consume.
• There are 68 million tonnes of wheat and rice in stock.
• Notably, this is more than twice what buffer stocking norms require.
• Sugar output this year is expected to be 32 million tonnes when usual consumption is 25 million tonnes.
• Potatoes production has increased by 80% in a decade, while the population has grown by less than 20%.
• Farmers leave unwanted potatoes in cold stores, which is then dumped in tonnes in the open to rot.
• Milk production has been growing at four times the rate of population growth.
• Farmers, in protest at low prices, are pouring tanker-loads of surplus milk down highways.

What are the concerns and challenges?

• Consumption - It is flawed to have surpluses when per capita consumption of most food items is low.
• The government could take steps to boost consumption.
• But the consumption levels are mostly in relation to the income levels.
• It is thus a challenge, as the main foodgrains are already being sold only at 10% of cost.
• So, other options at absorbing the excess production should be resorted to.
• E.g. milk could be included in the mid-day meal programmes in schools
• Export - Surplus could be exported, but India already happens to be the leading exporter of rice.
• It is also a significant exporter of some other food items.
• When exporting rice and sugar, large quantities of water used in their production are also exported.
• This is a concern given the country’s water shortage becoming a crisis.
• Productivity - India's agriculture remains uncompetitive because of low productivity.
• E.g. China grows two-and-a-half times the tomatoes that India does, on slightly higher acreage.
• This is something to be addressed but when productivity goes up, the problem of surplus gets worse.
• E.g. sugarcane: billions of rupees are already owed by sugar mills to cane growers due to higher production and low prices
• Approach - The latest hike in rice procurement prices and states offering subsidies will only encourage more production.
• All of it is aimed at helping farmers to earn minimum incomes, or protecting them from market vagaries.
• But there are other shortfalls that make the existing production unremunerative.

What is to be done?

• Lasting solutions involve changing the demand-supply mix for the surplus products.
• There is a need for diversification of cropping into new products.
• It may include those crops which the country imports like oilseeds and pulses.
• The existing measures at this front are not enough and should be accelerated.
• E.g. output growth rate for pulses, after years of stagnation, has reached a 4%, when looked at over a decade.
• Likewise, oilseeds output growth has been slower, however a change from the earlier stagnation.
• The recent Operation Green aimed at stabilising the fluctuations TOP production could help.
• The policies should thus transform from a shortage mentality to that of surplus scenarios at present.

Source: Business Standard