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Subject: Economics

  • India’s U-turn on Wheat Exports

    The Union commerce ministry was preparing to send delegations abroad to boost the country’s wheat exports, when the government abruptly banned its exports on 14 May.

    Why did India ban the export of wheat?

    • Record retail inflation has punctured India’s export hopes.
    • While wheat prices are up nearly 20%, prices of essential food items such as flour have risen nearly 15% last year.
    • Prices of other food items that use wheat, like bread and biscuits, have surged, too.
    • Heatwaves in the latter part of March, especially in northwest India, impacted the production of foodgrains.

    Is India staring at a food shortage?

    • India’s grain stocks are well above the buffer levels and the decision to regulate wheat exports was taken largely to check prices and curb hoarding.
    • The public distribution system in the country would be run smoothly.
    • However, the government has replaced wheat with rice in the Pradhan Mantri Garib Kalyan Yojana scheme for 2022-23.
    • The effort clearly is a response to the reduced availability of wheat.

    What has been the global reaction to the ban?

    • Agriculture ministers from G7 condemned India’s decision to withhold wheat exports amid a global grain shortage.
    • India is the world’s second-largest wheat producer and was expected to fill the gap created because of the Ukraine war.
    • However, wheat exports will be allowed in cases where an irrevocable letter of credit has already been issued.

    How will the ban affect India’s neighbors?

    • The export control will help India guide wheat trade in a certain direction.
    • Even with the ban, there is a window open for neighbouring countries.
    • The export will be allowed to other countries “based on the request of their governments”.
    • This window is crucial for Sri Lanka because the country is facing an economic crisis.
    • Also, Bangladesh and Nepal have traditionally relied on Indian wheat.

    What is the impact on farmers and traders?

    • The ban has deprived Indian wheat traders the opportunity to gain from the global grain shortage.
    • It may have an unfavorable impact on wheat farmers too.
    • Market prices of wheat had soared past the minimum support price (MSP) in recent months.

    Issues with the ban

    • This ban has impacted the credibility of India as a reliable supplier of anything in global markets.
    • It conveys that we don’t have any credible export policy as it can turn its back at the drop of a hat.
    • More interestingly, it also reflects a deep-rooted consumer bias in India’s trade policies.
    • It is this consumer bias that indirectly becomes anti-farmer. This ban deprives farmers from profit-making.
    • It only shows the hollowness of agri-trade policies and dreams of doubling agri-exports.
    • The export ban also reflects poorly on India’s image in playing its shared global responsibility amid the Russia-Ukraine war.

    Way forward

    • It may be recognised that inflation is a global phenomenon today caused by excessive liquidity injected by central banks and loose fiscal policies around the world.
    • India’s wheat export ban will not help tame inflation at home.
    • The Government could have announced a bonus of Rs 200-250/quintal on top of MSP to augment its wheat procurement.
    • The govt could have calibrated exports by putting some minimum export price (MEP).

    Back2Basics:

    How the Central and State governments procure Wheat?

     

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  • Monetary policy alone won’t bring down inflation

    Context

    The Reserve Bank of India (RBI) last week raised both policy rates and cut back liquidity in a surprise inter-meeting decision. The forcefulness and urgency of the policy shift have been seen as a signal of the RBI’s renewed commitment to fighting inflation via aggressive monetary tightening in the coming months.

    How do higher inflation rates slow inflation?

    • It is true that a large swathe of the global economy is in the throes of runaway inflation and that in many of these economies tightening monetary and fiscal policies is the right response.
    • Initial conditions: But initial conditions matter as do the specific drivers of inflation.
    •  There are typically three ways in which higher inflation rate slows inflation.

    1] Lowering inflationary expectations

    • Suppose one believes that because a central bank has not tightened enough, future inflation will be higher.
    • In that case, the obvious response is to bring forward future consumption and investment to the present, thereby adding to demand and fueling current inflation further.
    • So, in principle, the central bank by credibly committing to bringing down inflation through aggressive current actions can bring down expectations of future inflation. 
    • It won’t work in India: This is a very potent conduit of monetary transmission in developed markets, where there is a wide variety of inflation-hedging instruments, as well as in some emerging markets — Brazil, for instance —where inflation-indexation is widespread.
    • However, there is little empirical evidence that this channel works in India, even weakly.

    2] Exchange rate channel

    • Higher interest rates attract foreign capital that appreciates the currency, lowering import prices and, in turn, inflation.
    • Again, this is a powerful mechanism in Latin America and Central Europe, where bond flows — that are sensitive to interest rate differential —dominate capital movements and the import content of the consumer basket is large.
    • Will it work in India? This is not the case in India and, in any event, for this to work it would require extreme rate hikes in the country, given the anticipated aggressive tightening by the US Fed.

    3] Curbing credit growth

    • Raising both the cost of borrowing as well as its availability (for example, by increasing the cash reserve ratio) reduces credit growth, lowering demand, GDP growth and, eventually, inflation.
    • It works well in India: This is the credit transmission by which higher interest rates dampen inflation and it works well in India.
    • How much of today’s price increase is credit-driven? Even a cursory glance at bank balance sheets would suggest that credit growth is just treading water.
    • Having recovered from being negative in mid-2021, real credit growth is running just around 2 per cent.

    Comparison with inflation-monetary policy dynamics of 2010-11

    • Back then, real GDP growth was clocking over 10 per cent per quarter, nominal credit growth 20-25 per cent, and real credit growth over 10 per cent.
    • Inflation was unambiguously driven by an overheated economy and fueled by runaway credit.
    • In the event, the RBI assessed the drivers of inflation to be originating from the supply side — higher food and commodity prices — and moved at a glacial pace, such that even after 12 rate hikes inflation remained in double digits for much of that period.
    • Faced with a potential US Fed tightening in 2013, India found itself in a near-crisis situation.
    • Today things are different. Much of the inflation is driven by global food and commodity prices.
    • Despite the languishing private demand, core inflation remains high.
    •  But this has been the case for much of the last two years, strongly suggesting that the domestic supply chain disruptions in manufacturing and services, especially at the informal level, haven’t been repaired fully.
    • The reason why firms locate in the informal sector in the first place is because of lower transaction costs, so when parts of the supply chain shift to the higher-cost formal sector, it shows up as inflation during the transition before increased scale of production and efficiency bring down the cost over time.
    • None of these factors is affected much by higher lending rates. 
    • So the burden of taming inflation by tightening monetary policy will fall largely on lower credit.
    • There is clearly a case to remove the extraordinary monetary support provided during the pandemic.

    Conclusion

    The RBI had misread the drivers of inflation badly in 2010-11. Hopefully, it won’t repeat that mistake this time.

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  • Ujjwala LPG Scheme: 90-lakh beneficiaries don’t take refills

    In the financial year 2021-22, 90-lakh beneficiaries of the flagship welfare scheme, Pradhan Mantri Ujjwala Yojana (PMUY), did not take refill gas cylinders. And over one crore beneficiaries got their refills only once.

    About the PM Ujjwala Yojana

    • Pradhan Mantri Ujjwala Yojana (PMUY) was launched in 2016, with the aim to provide Liquefied petroleum gas (LPG) connections to five crore women members of below poverty line (BPL) households in the first phase.
    • he scheme was expanded in April 2018 to include women beneficiaries from seven more categories (SC/ST, PMAY, AAY, Most backward classes, tea garden, forest dwellers, Islands).
    • In the second phase the target was expanded to eight crore LPG connections.

    Why was this scheme launched?

    • Indoor air pollution is also responsible for a significant number of acute respiratory illnesses in young children.
    • Providing LPG connections to BPL households will ensure universal coverage of cooking gas in the country.
    • This measure has empowered women and protected their health. It reduced drudgery and the time spent on cooking.
    • It will also provide employment for rural youth in the supply chain of cooking gas.

    Ujjwala 2.0

    • Now migrant workers would only be required to submit a self-declaration of their residential address to get the gas connection.
    • Along with a deposit-free LPG connection, Ujjwala 2.0 will provide the first refill and a hotplate free of cost to the beneficiaries.

     

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  • PAN, Aadhaar made mandatory for high-value cash deposits & withdrawals

    The government has made requirement of a Permanent Account Number (PAN) or Aadhaar number for depositing or withdrawing Rs 20 lakh or more in a financial year or for opening a current account mandatory.

    Regulating high-value transactions

    • The Central Board of Direct Taxes, in a notification, said furnishing PAN or biometric Aadhaar will be mandatory for such high-value cash deposits or withdrawals from banks in a financial year.
    • The same will be applied for opening of a current account or cash credit account with a bank or post office.
    • Banks, post offices and co-operative societies would be required to report the transactions of deposits and withdrawals aggregating to Rs 20 lakh or more in a financial year.
    • As of now, PAN is required to be furnished for cash deposits of Rs 50,000 or more in a day.
    • With these rules, a threshold of Rs 20 lakh has been defined for the full financial year.

    How will this help tax department?

    • This move will help the government in tracing the movement of cash in the financial system.
    • It is expected to help the income tax department monitor deposits/withdrawals where tax would not be getting paid by the individual otherwise on his or her income.

    Why PAN-Aadhaar interoperability?

    • The PAN-Aadhaar interoperability will help banks to record details for those who don’t have PAN.
    • The interchangeable provision in the rules would allow a bank or financial institution to ask for Aadhaar in case an individual states that he or she doesn’t have PAN.
    • The Finance Act, 2019, has provided for the interchangeability of PAN with Aadhaar.
    • It has been provided that every person who is required to furnish or intimate or quote his PAN under the Income-tax Act.
    • Those who, has not been allotted a PAN but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar in lieu of PAN.

     

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  • Power crisis in India

    Context

    The power crisis has taken us by surprise. The question in everyone’s mind is: where did we go wrong? And who slipped up?

    Responsibilities in supply chain

    • Under the Electricity Act, it is the responsibility of the Distribution Licensee/Company (Discom) to provide reliable quality and round-the-clock electricity to all consumers to meet full demand.
    • To do so, they enter into contracts with a number of generating companies in order to ensure adequate supply.
    • These Discoms work under the oversight of the State Electricity Regulatory Commissions.

    Suggestions

    1] Dealing with the challenge of demand prediction

    • Qualitative transformation in demand: With higher incomes and the consequent increase in the use of air-conditioners and other electrical appliances, the nature of electricity demand is undergoing a qualitative transformation with rising daily and seasonal peaks, and spikes on very hot or cold days.
    • While demand prediction is inherently uncertain, the questions to ask are whether Discoms have been making and updating their demand growth projections and scenarios over the medium term with adequate supply arrangements in a robust manner.
    • This needs to become central to the regulatory process.
    • Ensuring reliable supply to meet unanticipated peaks, as have occurred now, requires making supply arrangements with reserve margins that are adequate.
    • The Regulatory Commissions need to provide for such expensive peaking power arrangements in the tariffs they approve.
    • It is also time to move towards separate peaking power procurement contracts in addition to the present system of long-term thermal power contracts.

    2] Demand-based time of day rates of electricity

    • A transition to demand-based time of day rates of electricity for generators as well as consumers would help.
    • These should be brought in by the Regulatory Commissions.
    • Flattening of demand curve: Peak demand moderation and flattening of the demand curve through a change in consumer behaviour is feasible with smart meters.
    • But this would take place only with a strong price signal, a large differential in peak and off-peak rates.

    3] Subsidies and politics

    • Free supply of electricity to farmers and households up to a specified level is not a problem as long as State governments pay for it as provided in the Act, and the Regulatory Commissions do not at the same time act from a political point of view and shy away from determining cost-reflective tariffs.
    • While the problem of delayed payments by Discoms is getting highlighted and needs to be resolved with a sense of urgency, the coal supply problem is not due to this.
    • Coal India needs to create capacities to rapidly ramp up production; and the Railways need to carry larger quantities of coal when demand surges, as has happened now.
    • Imported coal and gas generated electricity: There is idle but expensive generating capacity available — about 15-20 GW of gas-based power plants which can run on imported liquefied natural gas, and 6 GW-8 GW of thermal plants which can run on imported coal.
    • Consumers who are willing to pay more could be kept free of power cuts with purchase and supply of more expensive electricity generated from imported coal and gas.
    • To improve reliability, Discoms, with the approval of the Regulatory Commissions, need to go in for bids for storage.

    Conclusion

    A lesson is that demand growth projections and supply arrangements need to become central to the regulatory process.

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  • Control inflation by acting on liquidity

    Context

    The recent action of the Reserve Bank of India (RBI) to raise the repo rate by 40 basis points and cash reserve ratio (CRR) by 50 basis points is a recognition of the serious situation with respect to inflation in our country and the resolve to tackle inflation.

    Inflation in India and role of government expenditure

    • India’s CPI inflation has been fluctuating around a high level.
    • As early as October 2020, it had hit a peak of 7.61%.
    • It had remained at a high level of over 6% since April 2020.
    • It did come down after December 2020 but has started rising significantly from January 2022.
    • On the other hand, the Wholesale Price Index (WPI) inflation had remained in double digits since April 2021. The GDP implicit price deflator-based inflation rate for 2021-22 is 9.6%.
    • Even though the RBI’s mandate is with respect to CPI inflation, policymakers cannot ignore the behaviour of other price indices.
    • After the advent of COVID-19, the major concern of policymakers all over the world was to revive demand.
    • Keynesian prescription: This was sought to be achieved by raising government expenditure.
    • Thus, the expansion in government expenditure did not immediately result in increased production in countries where the lockdown was taken seriously.
    • However, the Keynesian multiplier does not work when there are supply constraints as in developing countries.
    • That is why the multiplier operates in nominal terms rather than in real terms in such countries.
    • Something similar has happened in the present case where the supply constraint came from a non-mobility of factors of production.
    • Nevertheless, the prescription of enhanced government expenditure is still valid under the present circumstances.
    • Perhaps the increase in output could happen with a lag and also with the relaxation of restrictions.

    Role of monetary policy

    • Why lover money multiplier rate? Initially, the focus of monetary policy in India has been to keep the interest rate low and increase the availability of liquidity through various channels, some of which have been newly introduced.
    • However, the growth rate of money was below the growth rate in reserve money.
    • This is because of lower credit growth which also depends on business sentiment and investment climate.
    • Thus the money multiplier is lower than usual.
    • The Government’s borrowing programme which was larger went through smoothly, thanks to abundant liquidity.
    • Even as the economy picked up steam in 2021-22, inflation also became an issue, this is a worldwide phenomenon.
    • In India too there is a shift in monetary policy.

    Analysing the cause of inflation

    • While discussing inflation, analysts focus almost exclusively on the increases in the prices of individual commodities such as crude oil as the primary cause of inflation.
    • General price level: Supply disruptions due to domestic or external factors may explain the behaviour of individual prices but not the general price level which is what inflation is about.
    • Given a budget constraint, there will only be an adjustment of relative prices.
    • Besides the fact that any cost-push increase in one commodity may get generalised, it is the adjustment that happens at the macro level which becomes critical.
    • It is the adjustment in the macro level of liquidity that sustains inflation.

    Inflation and growth

    • The possible trade-off between inflation and growth has a long history in economic literature.
    • The Phillip’s curve has been analysed theoretically and empirically.
    • Tobin called the Phillip’s curve a ‘cruel dilemma’ because it suggested that full employment was not compatible with price stability. 
    • The critical question flowing from these discussions on trade-off is whether cost-push factors can by themselves generate inflation.
    • In the current situation, it is sometimes argued that inflation will come down, if some part of the increase in crude prices is absorbed by the government. 
    • If the additional burden borne by the government (through loss of revenue) is not offset by expenditures, the overall deficit will widen.
    • The borrowing programme will increase and additional liquidity support may be required.

    Concomitant decisions on CRR and repo rate

    • These are concomitant decisions. Central banks cannot order interest rates.
    • For a rise in the interest rate to stick, appropriate actions must be taken to contract liquidity.
    • That is what the rise in CRR will do.
    • In the absence of a rise in CRR, liquidity will have to be sucked by open market operations.

    Conclusion

    Beyond a point, inflation itself can hinder growth. Negative real rates of interest on savings are not conducive to growth. If we want to control inflation, action on liquidity is very much needed with a concomitant rise in the interest rate on deposits and loans.

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  • What is the Xiaomi Scam?

    Last week, the Enforcement Directorate had seized Rs 5551.27 crore ($725 million) from the local bank accounts of the Chinese smartphones company, Xiaomi.

    Unfolding the Xiaomi Scam

    • Xiaomi faces charges of having made illegal remittances to foreign entities by passing them off as royalty payments.
    • It is a charge that Xiaomi has been continuously facing in India.
    • The ‘royalty and licence fee’ paid by Xiaomi India were not being added to the transaction value of the goods imported by the company and its contract manufacturers.
    • By not adding “royalty and licence fee” into the transaction value, Xiaomi was evading Customs duty.

    What is the recent probe?

    • The Enforcement Directorate has seized the bank account assets from Xiaomi Technology India, under the provisions of Foreign Exchange Management Act (FEMA.
    • The company had remitted over Rs 5500 crore to foreign-based entities, including one Xiaomi group entity, in the guise of royalty payments.
    • Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities.

    Xiaomi’s response

    • Xiaomi, for its part, said that it is committed to working closely with government authorities to clarify any misunderstandings.
    • It argued that the royalty payments and statements to the bank are all legit and truthful and were made for the in-licensed technologies and IPs used in our Indian version products.
    • It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments.
    • But it is a typical corporate response, something on the lines that Xiaomi did on the previous occasion too.

    How has China responded?

    • China firmly support its companies in protecting their lawful rights and interests.
    • It urged India to provide a fair, just and non-discriminatory business environment for Chinese companies making investment and operating in the country.
    • It is visible that China has made a dovish statement as they usually do.
    • Xiaomi now has alleged its top executives faced threats of “physical violence” and coercion during questioning by ED.

    Indian govt on strong wicket

    • Indian governmental authorities have made it clear that the Chinese companies were not being targeted.
    • And financial misdemeanours had indeed been committed by these companies.
    • The government has also explained the various cases in details and what it has seized so far.
    • But the Chinese companies seem to be playing the victim card.

    Back2Basics: Directorate of Enforcement (ED)

    • ED is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime (esp Money Laundering) in India.
    • It is part of the Department of Revenue of the Ministry of Finance.
    • It is composed of officers from the Indian Revenue Service, Indian Police Service and the Indian Administrative Service as well as promoted officers from its own cadre.
    • The total strength of the department is less than 2000 officers out of which around 70% of officials came from deputation from other organizations while ED has its own cadre, too.
    • The prime objective of the Enforcement Directorate is the enforcement of two key Acts namely:
    1. Foreign Exchange Management Act 1999 (FEMA) and
    2. Prevention of Money Laundering Act 2002 (PMLA)

     

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  • Debate over Front of Pack Labelling (FoPL) of Packaged Food

    The Food Safety and Standards Authority of India (FSSAI) is expected to issue a draft regulation for labels on front of food packets.

    What is FoPL?

    • In India, packaged food has had back-of-package (BOP) nutrient information in detail but no FoPL.
    • Counter to this, FoPL can nudge people towards healthy consumption of packaged food.
    • It can also influence purchasing habits.
    • The study endorsed the HSR format, which speaks about the proportions of salt, sugar, and fat in food that is most suited for consumers.
    • Countries such as the UK, Mexico, Chile, Peru, Hungary, and Australia have implemented FoPL systems.

    What warranted such rating in India?

    • Visual bluff: A lot of Indian consumers do not read the information available at the back of the packaged food item.
    • Burden of NCDs: Also, India has a huge burden of non-communicable diseases that contributes to around 5.87 million (60%) of all deaths in a year.
    • Healthy dietary choices: HSR will encourage people to make healthy choices and could bring a transformational change in the society.
    • Supreme Court order: A PIL seeking direction to the government to frame guidelines on HSR and impact assessment for food items and beverages was filed in the Supreme Court in June 2021.

    Which category of food item will have HSR?

    • All packaged food items or processed food will have the HSR label.
    • These will include chips, biscuits, namkeen, sweets and chocolates, meat nuggets, and cookies.
    • However, milk and its products such as chenna and ghee are EXEMPTED as per the FSSAI draft notified in 2019.

    Will there be pushback from food industry?

    • Negative warning: Some experts opposed the use of the HSR model in India, suggesting that consumers might tend to take this as an affirmation of the health benefits rather than as a negative warning of ill effects.
    • Lack of awareness: This is significant because there is lack of awareness on star ratings related to consumer products in India.
    • Impact on Sale: Certain organisations fear it might affect the sale of certain food products.

    When will the rating come into force?

    • FSSAI’s scientific panel recommends voluntary implementation of HSR format from 2023 and a transition period of four years for making it mandatory.
    • It noted that the proposed thresholds are in alignment with the models implemented in other countries and ‘WHO population nutrient intake goals recommendations’.
    • FSSAI will analyse the nutritional information in 100 mg of packaged food.
    • The food safety compliance system licensing application portal will have a module for generating certificates wherein a licensee can enter details of a product.

     

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  • What are India’s plans to avert a Wheat Crisis?

    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.

     

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  • What is Direct Seeding of Rice (DSR)?

    The Punjab government recently announced Rs 1,500 incentive per acre for farmers opting for Direct Seeding of Rice (DSR), which is known for saving water.

    What is DSR technique?

    • In transplanting, farmers prepare nurseries where the paddy seeds are first sown and raised into young plants.
    • These seedlings are then uprooted and replanted 25-35 days later in the main field.
    • Paddy seedlings are transplanted on fields that are “puddled” or tilled in standing water using tractor-drawn disc harrows.
    • In DSR, there is no nursery preparation or transplantation. The seeds are instead directly drilled into the field by a tractor-powered machine.

    How much water is required to grow one kg rice?

    • Paddy is non-shelled rice that farmers grow and sell in mandis and then after milling paddy rice is prepared.
    • According to the studies, around 3,600 litres to 4,125 litres of water is required to grow one kg rice depending upon the paddy variety.
    • Long duration varieties consume more water.
    • In Punjab, 32% area is under the long duration (around 158 days) paddy varieties, and the rest comes under paddy varieties that take 120 to 140 days to grow.
    • So, on an average 3,900 to 4,000 litres water is required to grow one kg rice in the state.

    How much water is used in Punjab every year to grow rice?

    • In 2020-21, Centre procured 203 lakh tonnes of paddy from Punjab.
    • After milling, this procured paddy resulted in 135.98 lakh tonnes of rice.
    • Since studies put average water required to produce one kg rice at 4,000 litres, so in one year – based on last year’s estimate – Punjab needed 5,400 billion litres of water to produce 135 lakh tonnes rice.

    How much water can DSR help save?

    • DSR technique can help save 15% to 20% water.
    • In some cases, water saving can reach 22% to 23%.
    • With DSR, 15-18 irrigation rounds are required against 25 to 27 irrigation rounds in traditional method.
    • Since area under rice in Punjab is almost stagnant, DSR can save 810 to 1,080 billion litres water every year if entire rice crop is brought under the technique.

    Are there any other benefits of DSR tech?

    • DSR can solve labour shortage problem because as like the traditional method it does not require a paddy nursery and transplantation of 30 days old paddy nursery into the main puddled field.
    • With DSR, paddy seeds are sown directly with machine.
    • DSR offers avenues for ground water recharge as it prevent the development of hard crust just beneath the plough layer due to puddled transplanting.
    • It matures 7-10 days earlier than puddle transplanted crop, therefore giving more time for management of paddy straw.
    • Research trials indicated that yield, after DSR, are one to two quintals per acre higher than puddled transplanted rice.

    Getting optimum results

    • Experts said that with DSR technique, which is called ‘tar-wattar DSR’ (good soil moisture), farmers must sow paddy only after pre-sowing (rauni) irrigation and not in dry fields.
    • Further, the field should be laser levelled.
    • They said that spraying of herbicide must be done simultaneously along with sowing, and the first irrigation, which is done at 21 days after sowing.

    Limitations of the DSR

    • Suitability of soil is the most important factor as farmers must not sow it in the light-textured soil.
    • This technique is suitable for medium to heavy textured soils including sandy loam, loam, clay loam, and silt loam which accounts for around 80% area of the state.
    • It should not be cultivated in sandy and loamy sand as these soils suffer from severe iron deficiency, and there is higher weed problem in it.
    • Also, avoid direct seeding of rice in fields which are under crops others than rice (like cotton, maize, sugarcane) in previous years as DSR in these soils is likely to suffer more from iron deficiency and weed problems.

     

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