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Export boom aids agribusinesses, not farmers
Rising agricultural exports from India, which shipped out a record 20 million tonne of foodgrains in 2020-21, have breathed new life into agribusinesses, but farmers say they have hardly gained because they had to sell cheap
Rising agricultural exports from India, which shipped out a record 20 million tonne of foodgrains in 2020-21, have breathed new life into agribusinesses, but farmers say they have hardly gained because they had to sell cheap.
Agricultural trading firms have benefited at the expense of farmers, export prices show.
In the financial year ended March 2021, the country exported farm produce worth nearly $42 billion, a growth of about 18%, on the back of a rise in global commodity prices, official statistics show.
The current boom is nearly of the same level seen in 2013-14, when exports peaked. India’s farm exports grew five times from just $8.7 billion in 2004-05 to $42.6 billion during 2013-14. They then fell sharply to $33 billion in 2016-17 and have been muted since.
The country exported 17.72 million tonnes of rice till March 30. It also sold nearly 3 million tonnes of wheat and a similar amount of maize abroad.
A firming up of global sugar prices, good news for India, the world’s second largest producer of the sweetener, prompted the government on Thursday to cut the subsidy on sugar exports from ₹6,000 a tonne to ₹4,000.
Growing demand around the world for food staples such as rice, wheat and sugar are keeping Indian agriculture businesses and processing plants humming, as the pandemic began to ease in many nations. However, the issue is that farmers have gained the least.
International food commodity prices rose for the 11th consecutive month in April, with sugar and cereals “resuming their upward trend”, the Food and Agriculture Organization (FAO) said on May 6. FAO’s Food Price Index in April rose 30.8% higher than its level in the same month last year.
“A key reason for the surge of exports, especially in cereals, is that Indian produce has been very competitive (in terms of pricing) vis-à-vis countries like Australia and Thailand,” said Abhishek Agrawal of Comtrade, a commodities trading advisory firm.
Competitive pricing simply means Indian exporters were able to offer cheaper prices to international buyers than their rivals . Moreover, rice producer Thailand’s shipments fell due to the drought and Vietnam too had a smaller crop in 2020. Indian exporters filled the gap.
“Indian wheat is selling for about $280 a tonne (1000 kg), about 6% less than what competitors from Ukraine and Australia are asking,” said Vishal Tomar, who owns a wheat aggregator business in Indore.
This rate for wheat exports is nearly the same as the minimum support price (MSP) of ₹1975 a quintal (100 kg). Analysts say this means the producer or farmer was likely paid much below MSP rates. An MSP is a federally fixed floor rate gives a return of at least 50% over cost of cultivation.
Sunil Singh, a farmer from Bihar’s Arariya district, said he sold wheat for ₹1600 a quintal. “That was the highest rate available,” he said over phone.
Ramesh Baranwal, a rice grower from Uttar Pradesh’s Balia, said he sold paddy (unmilled) for about ₹1400 a quintal, which is below the MSP of ₹1868.
It is not difficult for exporters to buy produce below MSP. “They can always turn to states where the government’s procurement isn’t very robust,” Agrawal said.
To be sure, the Union government has procured 36.6 million tonnes of wheat so far in the current season, which is nearly 30% more than the quantity bought from farmers during the corresponding period last year, food ministry data shows.
However, procurement by government remains weak in states such as Bihar, Uttar Pradesh and West Bengal. The 70th round of National Sample Survey for 2012–13 showed only 32.2% of paddy farmers and 39.2% of wheat growers were aware of MSPs. It also revealed that only 13.5% paddy farmers actually benefited from MSP, while the figure for wheat growers was 16.2%.
