Wheat Imports: Will India Reverse To A Ship To Mouth Existence?

On February 2, 2006, a mere two months before the rabi harvest of wheat, the government announced duty-free import of five lakh tonnes of wheat. The justification is the bringing down of retail prices, which have been rising over the last few months, especially in the Southern States of Kerala and Karnataka where prices have reached Rs. 1100 – 1200 a quintal.

However there are many holes in the Government’s arguments justifying duty free imports of wheat.

Firstly, wheat is not a staple of Kerala and Karnataka. Kerala is a rice eating state. Karnataka’s diet is based on rice and ragi. Using the southern states as a scape goat for wheat imports in fact hides the real reason – which is to make India dependent on food grains imports from the U.S as a part of the U.S – India Agreement on Agriculture. The high agriculture subsidies in the U.S lead to low prices and artificial low prices are being used to justify imports, by arguing as the Agriculture Minister did that “costs incurred to transport wheat from the North were high”, suggesting that farmers of Punjab, Haryana, Uttar Pradesh, Madhya Pradesh should lose out on domestic market access in order for global corporations to get access to India’s markets.

Secondly, while the retail prices have been rising, the wholesale prices are falling. As Mr. Sharad Pawar, the Agriculture Minister himself stated “wholesale wheat prices have declined across the major wheat consuming areas. The prices are down in Bihar (by Rs. 60 a quintal), Jharkhand (by Rs. 50 a quintal), West Bengal (by Rs. 35 a quintal), Uttar Pradesh (by Rs. 85 a quintal), Tamil Nadu (by Rs. 200 a quintal), Gujarat (by Rs 110 a quintal), Madhya Pradesh (Rs. 100 a quintal) and by Rs. 100 a quintal in Mumbai and Delhi” (Business Line, 3.2.03)

Importing duty free wheat two months before the rabi harvest will further depress the prices for farmers. We could witness farmers suicides in wheat growing areas as we have in cotton growing areas. But it would not just be for the insecurity of farmers these imports will create. They are threatening the food security of the country by reversing to a ship to mouth existence. The Minister has admitted that the wheat import consignment would take about 60 days to reach the Southern parts of Chennai, Karnataka, Tuticorin and Vishakapatnam. In 60 days the farmers of North India will have harvested their wheat. Why could the Government not wait for the domestic harvest instead of importing wheat?

The Government has clearly announced the imports as part of the US – India “Knowledge Initiative in Agriculture”, which has a commercial component of imports of food grain from the U.S. The timing is more for President Bush’s visit, than for India’s food security. Infact, the duty free imports will create food insecurity of India, both by starting a trend for dependence on imports and by destroying domestic markets.

While arguing in the WTO that India has to protect the livelihoods of our small farmers and peasants, under U.S pressure through a bilateral agreement, the Government is in fact encouraging dumping by allowing duty free wheat imports that are totally unnecessary just a few months before our own wheat harvest. According to the International Agriculture and Trade Policy Institute, while the full cost of U.S wheat in 2001 was $6.24 / bushel, its export price was $ 3.5 / bushel. From 1995, when WTO was established to 2001, dumping jumped from 23% to 44% in the case of wheat. With the subsidies increasing, the dumping rates are also increasing. The recently concluded WTO Ministerial in Hong Kong did nothing to stop dumping. The date of 2013 to end export subsidies will only touch 2 – 3% of the $400 billion subsidies – the rest will stay in place to distort prices and artificially lower them.

For the Government of India to cite these artificially low prices as justification for imports is a recipe for destroying our farmers and food security. Subsidised, artificially cheap imports also expose the sham of the category of “protectionism” and “competitiveness” that guide trade liberalization.

Competitiveness is measured on the basis of the Nominal Protection Coefficient (hereafter NPC), which is the ratio of domestic price to the border price. Symbolically,

NPC = Pd/Pb


NPC = Nominal Protection Coefficient of the commodity under consideration

Pd = Domestic price of commodity Pb = Border or reference price of commodity after taking care of Transportation and marketing expenses.

NPC basically helps in measuring, the divergence of domestic price from the international price and thus determines the degree of export / import competitiveness of the commodities in question. However, such a mechanical, ahistorical, apolitical construct fails to capture the historical and political context of trade and food security.

When the international prices are controlled by two or three corporations who also control the market in external inputs, international prices can be fixed at extremely low levels to grab markets, Pb can always be lowered below Pd, hence destroying domestic markets and rural livelihoods. This is further facilitated by the subsidies northern governments give to agribusiness and exporters, and the direct support they give to farmers to allow them to survive in a negative agricultural economy.

This is not a free market it is a contrived market. This is not free trade it is fraudulent trade.

“Competitiveness” in a global free trade calculus is highly fictitious and abstract, with the calculation based on comparison of the international price and the domestic price of a commodity. It totally ignores climate, ecology, local economies and local needs and changing international market prices.

According to the crude calculus of competitiveness, Indian wheat was not “competitive” in 1994 when international price was US %151 but it became “competitive” in 1996 when the international price shot up to US $208. In 2006 Indian wheat is again not competitive.

Trade liberalization is supposed to bring benefits to national agricultural economies. However, the beneficiaries are neither farmers nor governments of the Third World. An editorial of a business daily in India had a heading “Freeing Wheat”. It is significant to ask what wheat is being freed from and whom it is being freed for. Wheat needs to be freed from chemicals, and wheat farmers need to be freed from their bondage to chemical and seed corporations and unfair trade. However, it is neither the freedom of wheat nor the freedom of farmers, but the freedom of corporations and grain traders that is being referred to.

This freedom to export food grain under liberalized trade has already benefited the giant grain traders Cargill and Continental. They bought wheat at $60 to $100 per tonne from India and sold it at $230-240 per tonne at the international market in 1996, making a neat $130-170 profit per tonne, while India lost $100 m in exports because of the concentration of power in the hands of five merchants of grain. The U.S grain giants turned to the Indian market because the large scale wheat monocultures in the U.S, the bread basket of the world, had been affected to nearly fifty percent of the farmland by a combination of drought and the Karnal Bunt – a fungal disease. As a result of the U.S. crop failure, India’s wheat exports increased dramatically.

However, exports of wheat led to domestic shortages and a rise in prices and the two million tonnes that were exported in mid 1996, were in effect re-imported in late 1996 to overcome domestic shortages. Agricultural growth did take place, but not in terms of food and not for India. The quantity of wheat in the world and in India remained the same, India’s foreign exchange expenditure increased, leaving India financially poorer. Because of the domestic price increase the poor had a decline in their food entitlements. Only the “Merchants of Grain” gained from the liberalization of wheat exports. And the merchants of grain will gain from the 2006 wheat imports.

The import of wheat will also give Government the excuse to not procure from farmers at the time of harvest.

In any case, the new agriculture policy is focused on growing fruits and vegetables for export under the “farm to port” slogan. If our agriculture is focused on “farm to port”, our food systems will necessarily slip into “ship to mouth”.

We need to think seriously about the future of our food security and food sovereignty. The Governments current policies are clearly failing our farmers and threatening our sovereignty.

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