From UPSC perspective, the following things are important :
Prelims level : Wheat cultivation in India
Mains level : Public procurement of wheat
On May 4, the government lowered its wheat production estimates by 5.7% to 105 million tonnes (MT) from the projected 111.32 MT for the crop year ending June.
Decline in wheat production
- India is the second largest producer of wheat in the world, with China being the top producer and Russia the third largest — Ukraine is the world’s eighth largest producer of wheat.
- After five straight years of a bumper wheat output, India has had to revise downwards its estimated production.
- Unprecedented heatwaves across the north, west and central parts of the country, and March and April being the hottest in over 100 years, have caused substantial loss to the yield.
- Researchers attributed the lower estimates to “early summer” affecting the crop yields in States, especially Punjab, Haryana and Uttar Pradesh.
Why is there a decline in govt procurement?
- Ukrainian war: Private traders have been prompted to buy more wheat from farmers as the price of wheat at the international level has shot up due to Ukrainian war.
- Higher prices: A large quantity of wheat was being bought by traders at a higher rate than the minimum support price (MSP).
- Hoarding by farmers and traders: Also, farmers are holding on to some quantity of wheat, expecting higher prices for their produce in the near future.
How will this impact the public distribution of grain?
- Wheat procurement is undertaken by the state-owned Food Corporation of India (FCI) and other agencies at MSP to meet the requirements under the Public Distribution System (PDS).
- Other running welfare schemes is the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) introduced during the pandemic.
- The government has revised the grain allocation under PMGKAY for May to September 2022.
- According to the new guidelines, the FCI will fill the gap left by wheat with an increased allocation of rice.
- Pointing out that from next year, fortified rice will be distributed to the entire Public Distribution System (PDS).
Will domestic wheat prices be hit?
- As government wheat procurement has dipped, concerns are being raised about the stability of prices in the country.
- The availability of grain for internal consumption, many agri-experts argue should be a priority.
- The government has dismissed concerns about both prices and stocks, asserting that India is in a comfortable situation with the overall availability of grains.
- India has enough stocks to meet the minimum requirement for next one year for meeting the requirement of welfare schemes.
How is the global supply situation shaping up?
- In order to meet the gap created by reduced Russian and Ukrainian exports, importers are turning to alternative markets.
- Wheat-producing countries like India are looking to increase exports.
Will farmers benefit?
- Farmers will certainly benefit from the scenario as they are being offered a price above the MSP.
- Amid the Russia-Ukraine crisis, new markets in countries like Israel, Egypt, Tanzania and Mozambique have opened up for India.
- However, if private traders continue to buy above MSP, eventually that could stoke inflation.
- More private buying of wheat will help India expand the agri-export basket to new countries, riding the current crisis situation.
- This trade relationship will stay even when the global crisis is over, which means farmers will get about 10%-15% extra price as market prices are ruling above MSP.
What about export plans?
- After Egypt, Turkey has also given approval for the import of Indian wheat.
- India has been eyeing deals with new export markets in European Union countries too.
- Despite the crop loss and revision of the output estimate, the Centre maintained that no curbs would be placed on wheat exports and that it was facilitating traders.