A harsh summer, and a looming Indian wheat crisis

India, the world’s third-largest wheat producer -- next to China, the leading one, and Russia -- has experienced the worst summer in 100 years. A 6 per cent yield loss, and as much as 20 per cent of the harvested wheat crop with shrivelled grains due to excessive summer heat between March and April, when the rabi crop was harvested, is worrying. Is India heading towards a wheat crisis?

The current wheat harvest of 105 million tonnes, down from the projected 111.32 million tonnes, is 94.32 per cent of the target, a shortfall of 5.7 per cent. Its impact on food price inflation, vis-à-vis local procurement by private trade, cannot be brushed aside. Let us analyse the situation against the unfolding global wheat market scenario. Since February, the Russian invasion of Ukraine (a big wheat producer and exporter, like Russia), has upset the applecart. Private trade in India is seeing this as a great opportunity to tap into the global wheat export market.

India exported a record of 7.85 million tonnes of wheat last fiscal. New Delhi had estimated an export of 12 million tonnes for this fiscal, to cash in on the global wheat price rally – it has jumped almost 50 per cent following the Russia-Ukraine war. However, only 4 million tonnes has been contracted for export, of which 1.1 million tonnes had already been exported in April. After Egypt, Turkey has also approved import of Indian wheat. India is eyeing the European market also. Markets are opening up for Indian wheat in Israel, Tanzania and Mozambique, too. Indian farmers will benefit, as they are being offered prices above the minimum support price offered by the Government of India.

The danger

Wheat, along with rice, is the most important Indian diet staple. The price spiral upwards will affect very adversely the poor and the marginal wheat consumers. It is important in this context that New Delhi strictly ensures that the market price for the domestic consumer is not determined by the private player. If a couple of big business enterprises decide to swoop in on the Indian wheat market and corner huge quantities of wheat for export, it will upset the food security of India, and domestic wheat prices will skyrocket.

This can certainly happen because the rise in world wheat price by as much as 50 per cent offer an irresistible temptation for these big businesses to make a killing at the expense of the Indian wheat consumer. In such a scenario, the wheat buffer stock must be released under the Open Market Sale Scheme to control the domestic wheat price. The National Food Security Act (NFSA) must be invoked, and New Delhi must see to it that India’s food security is not threatened.

The bottom line

New Delhi must be flexible enough on the question of the minimum support price (MSP) syndrome, rather than have a Baconian mindset. To understand this, one must go back to India’s farming history, starting from the Green Revolution phase. The concept of MSP for wheat was first mooted in 1966 to incentivise the Punjab farmers to take to the so-called “miracle” dwarf wheat varieties. Rice was added to the list later. When first introduced, the MSP for wheat was Rs 54/quintal. Today, it is Rs 2,015/quintal, which is an increase of 3731.5 per cent in 56 years. These “miracle” dwarf wheat varieties were highly responsive to chemical fertilisers. India then had no independent chemical fertiliser manufacturing units. Almost all fertilisers were imported from the US.

Interestingly, these fertiliser manufacturing units were once the factories manufacturing second world war chemicals and they had been closed after that war. The invention of the Haber-Bosch process led to urea manufacture and India, in fact, became the dumping ground for its urea fertilisers. The simultaneous work at the International Centre for Maize and Wheat Research in Mexico (again, US-controlled) on the dwarf wheat varieties, combined with the urea fertiliser, offered a golden opportunity for the US.

Inarguably, the situation has vastly changed since then. Most of these “miracle” wheat varieties have fallen by the wayside, due to many reasons, like wheat rust, which a cross-bred plant variety will have when it has alien blood.

New Delhi must enforce a flexible MSP policy. In some of the most important wheat-producing states like Punjab, Madhya Pradesh, Uttar Pradesh, Rajasthan and Gujarat, farmers are selling wheat to traders at the minimum support price of Rs 21-24 per kg, while New Delhi offers only Rs 20.15 per kg. New Delhi must quickly act to revise the MSP upwards to plug
the sale of wheat to private manipulators.

(The writer is a former professor at the National Science Foundation, The Royal Society, Belgium)