http://goo.gl/31hOY0
OR
http://epaper.financialexpress.com/c/3490229
USDA GIVES WRONG REASONS FOR INDIA’S RISING AGRO EXPORTS
Tejinder Narang
This paper editorial “Cultivating
Exports” of 6th September 2014 (http://goo.gl/928ZJl
) has appropriately commented upon USDA report “India’s
Agricultural Exports Climbs To Record High” of 29th August2014 (http://goo.gl/boZyfM ). USDA’s certification of
steep ascension in agro exports from $5
billion in 2003 to $39 billion in 2013 may be flattering but facts and
figures cited are debatable while conclusions are less than credible.
It states that “one of the driver’s behind India’s export
growth has been the dramatic growth in government support provided to
agriculture, particular for wheat and rice”. The truth is that Government
support through of Food Corporation of India (FCI) during 2003 to 2011 was highly erratic (chart below).
In 2003-05, FCI’s non-Basmati rice
export was 3 million tons (mts) and wheat about 8mts. FCI thereafter withdrew
from exports. In next two rears-- 2005-07--
all Basmati (aromatic) and non-Basmati rice exports originated from private
holdings. In 2006-08, FCI “imported” 7.2 mts of wheat. Effective October 2007, Government
prohibited Non-basmati Rice and wheat shipments on pan India basis though
Basmati deliveries continued. (Refer Government notifications http://goo.gl/4dn0ta).
From September 2011, Wheat and
Non- basmati and wheat export was again revived unconditionally. It
is grossly erroneous to label such go-stop-go signals and frequent policy
interventions during 2003-11 as Government “support”.
The upsurge in rice export after
2011 is attributable to India-Iran rupee payment agreement owing to US
sanctions, higher yield per hectare of hybrid varieties ; India’s virtual
monopoly in Basmati exports; Thailand over–pricing its paddy procurement; China’s rice import form
Vietnam leading to firming up
prices. An “arm’s length approach” is
the only support accorded by the Government for the rise in rice exports.
USDA believes that higher MSP in last six
years of rice (increased by 75%) and wheat (raised by40%) led to higher
procurement and subsequent releases of stocked grains in the domestic market
lowered prices “making Indian supplies more competitive”. On the contrary higher Government
purchases led to inflationary pressures in domestic market making exports non-competitive.
Furthermore rice was never released or auctioned in the domestic market but
supplied only to targeted beneficiaries under PDS (Public Distribution System).
State governments are reluctant to lift
such additional PDS releases for various reasons.(http://goo.gl/gvo93S).
Subsidies
USDA’s tabulation of data to
arrive at $85 billion (table below) as government support to agriculture is out
right questionable. It covers -- capital and revenue expenditure on rural
development (road, drainages etc.); major and minor irrigation, agro research;
financial institutions’ support, export promotion boards, soil and water
conservation, forestry/ wild life/animal husbandry etc. These add up to “extra” of $47
billion and do not constitute subsidies to farmers or traders by any stretch of
imagination. Financial Express editorial has rightly commented—“how can
irrigation distort trade?” Or for that matter how agro –research/soil water
conservation manipulate trade?
If intention is to allege or enlarge Indian
subsidies in bizarre manner then USDA could have also included “establishment
cost” of IMD (India’s Metrological Departments) for weather reporting or
warnings, ministries of Food, Agriculture, Commerce, Finance, Customs, all
state governments’ departments of Food and Civil Supplies Corporations. There
is no end to such wild collation of data to justify a preconceived hypothesis.
Reasonable calculations of
support can include funding for FCI, fertilizer, power and state bonuses. This amounts to $(85-47)=$38 billion for or Rs.2,20,000
crores-- about 13% of Agro GDP of $284 billion and certainly not 29% projected
by USDA. (See amended table). Gulati-Huda study on Indian agricultural
subsidies around 10% is vindicated.
Wheat
USDA inaccurately comments that wheat exports
by the government are “at prices below
acquisition and transport costs”. Government (FCI) initiated action on
wheat from 2012 onwards only. Both Government and privates are competing for
contracting. In 2012-13 shipments were about 6.5 mts—of which 3.5 mtsare from
open market and balance from FCI. Average
fob realisation in 2012-13 is $310/mt fob.
“Acquisition” cost of FCI
includes local taxes while grains are purchased on MSP (Minimum Support Price).
Extant government policy is that taxes are not exportable. Local taxes are
reimbursed to private exporters also. FCI cannot burden exports with local
taxes too. Taking 2012-13 MSP/mt of Rs
12850 + shortest route as per railway freight calculator ( http://goo.gl/o0rdcm) from Indore-Madhya Pradesh
to Kandla port (Gandhidham station) of Rs 990/mt + port handling Rs 500/mt,
total cost is Rs 14340/mt. At $/Rs= Rs 54.40 in 2012-13, export price is
$264/mt fob, while FCI realised about $310/mt fob. USDA has again erred. Private trade too could make wheat shipments
at almost matching prices discovered through FCI/PSUs tenders when overseas
market scaled at peak and not, when values have bottomed out, as is the case
now.
Export of cotton, soymeal,
guargum, corn, buffalo meat and “other products” like tea, coffee, spices are
totally market driven and pushed by private initiatives. Currently, there is a
sharp decline in wheat, corn, soymeal, cotton, sugar export. Had there been any
effective Government support, situation may have been different.
Brazil’s exports about 20 mts
corn, 29mts sugar, 38mts soybean; 15 mts of soymeal while India’s export is
4mts corn, 1.5-2 mts sugar, nil for soybean; 4mts soymeal. India’s lead in
percentage growth projected by USDA gives a distorted picture when compared in
absolute terms.
This report definitely needs
substantive correction in picking up relevant data, its tabulation and
conclusions.
