Electoral compulsions apart — the predominantly Maratha and Jat peasantry of Maharashtra and Haryana wields numerical as well as socio-political influence in their respective states – the Modi government’s latest actions seem to have been equally guided by economic factors.
On Friday, the Narendra Modi government lifted curbs on onion and basmati rice exports in the form of minimum floor price, of $550 and $950 per tonne respectively, below which they cannot be shipped out of the country. The export duty on onions remains, but has been halved to 20 per cent now. Friday also saw the Centre hike the effective import duty, inclusive of special agriculture and social welfare cesses, on crude palm, soyabean and sunflower oil from 5.5 to 27.5 per cent. The duty on refined palm, soyabean and sunflower oils was raised from 13.75 to 35.75 per cent. The political timing of these moves cannot be missed. Haryana, a key basmati paddy growing state, votes on October 5 when the new crop’s market arrivals would have also taken off. Onion and soyabean are, likewise, major crops in Maharashtra’s Nashik-Ahmedngar-Pune and Marathwada-Vidarbha regions respectively. That state, too, is scheduled to go to the polls later this year.
Electoral compulsions apart — the predominantly Maratha and Jat peasantry of Maharashtra and Haryana wields numerical as well as socio-political influence in their respective states – the Modi government’s latest actions seem to have been equally guided by economic factors. Soyabean is trading below its official minimum support price in the wholesale mandis of Maharashtra and Madhya Pradesh even as harvesting and marketing of the crop will start only from next month. Global vegetable oil prices are also roughly 50 per cent down from their March 2022 peaks scaled immediately after Russia’s invasion of Ukraine. While onion prices in Maharashtra’s Lasalgaon are ruling more than twice their year-ago levels, farmers have planted almost 50 per cent more area under the tuber in the current kharif season. That crop will be ready for harvesting in a month’s time. A good monsoon — cumulative rainfall during the season (June-September) has been 7.7 per cent above the normal average so far, while both spatially and temporally well distributed — should translate into bountiful harvests of most kharif crops this time.
The Modi government’s farm trade policy in the last two years and more has been excessively pro-consumer, with export and private stockholding restrictions being imposed alongside liberal imports. Ideally, policy should be neutral between consumers and producers, with any deviations being temporary and rules-based as opposed to arbitrary and knee-jerk. The easing of food inflation pressures provides room to dispense with the remaining export curbs on non-basmati rice, sugar, onion and even wheat. There is no justification for stocking limits on pulses and wheat either. Inflation in these can be better addressed by allowing duty-free imports. The government must also build a buffer stock of all essential food items by procuring when prices are low and offloading when they go through the roof.