A report by the Indian Council for Research on International Economic Relations (ICRIER) has highlighted significant losses incurred by Indian farmers, totalling approximately Rs 40,000 crore, due to government measures aimed at curbing food inflation. Released on September 14, the report sheds light on the consequences of the decision to offer wheat under the Open Market Sale Scheme (OMSS).
In February, wheat prices experienced a sharp 25.4% inflation rate, causing concern within the government as market prices surpassed the minimum support price. To rectify this, the government initiated the sale of 3.4 million metric tonnes of wheat below the cost of production, coupled with imposing limits on wheat stocking for the first time in 15 years.
While these measures successfully lowered wheat price inflation to 9.33% by August, they effectively imposed an “implicit tax” on farmers, resulting in substantial income losses. The report explains that during the 2023-24 marketing season for rabi crops, the minimum support price for wheat was set at Rs 2,125 per quintal, while market prices reached around Rs 2,673 per quintal in January. The government’s OMSS sales further reduced wheat prices to levels below the economic cost of production, depriving farmers of an additional Rs 548 per quintal, totalling around Rs 40,000 crore in losses.
The report also highlighted India’s wheat exports during the 2021-22 fiscal year, noting that it exported 7.5 million metric tonnes of wheat when global prices were surging due to the Russia-Ukraine conflict. This export opportunity could have benefited Indian farmers as domestic prices were also rising. The report questioned whether such policies favoured urban consumers over farmers.
The study also raised concerns about similar policies affecting rice, pulses, and onion farmers, predicting that they would suffer similar losses. The report emphasized the need to revisit these market restrictive policies and compensate farmers for the significant transfer of resources from producers to consumers.
Additionally, the report discussed the negative impact of the government’s ban on non-basmati rice exports, affecting India’s trade partners, especially in Africa. It suggested a more calibrated trade policy that reduces import duties when needed, such as for wheat, to control prices effectively.
In conclusion, the ICRIER report underscores the substantial losses suffered by Indian farmers due to government interventions aimed at controlling food inflation. It calls for a revaluation of these policies, advocating for more transparent communication, reduced import duties, and compensation for farmers to strike a balance between consumer and producer interests.