Duty-Free Wheat Import is Anti-Farmer in Times of Cash Crunch

The competition introduced by the zero-tax on wheat import renders the trade unfair for Indian farmers.

A file photo of farmer-protest in New Delhi on 8 August 2013. (Photo: Reuters)

The Central government slashed the import-duty on wheat to zero on 8 December, making the import of wheat completely duty-free.

The government has estimated the total production for 2015-2016 to 93.50 million tonnes. However, private assayer RML AgTech has estimated this year’s production to be 83 million tonnes, reports Business Standard.

In Times of Demonetisation; Duty-Free Wheat Import is No Relief

The farmers are facing trouble meeting consumption needs due to demonetisation. The sowing of wheat was delayed due to the sudden cash-crunch faced by farmers as Rs 500 and 1,000 currency was demonetised, poll-bound Uttar Pradesh’s Rashtriya Lok Dal (RLD) west spokesman, Praveen Deshwal said, according to The Times of India.

The competition introduced by the zero-tax on wheat import renders the trade unfair. Announcing a protest against the government decision, Deshwal said:

Our party will not tolerate oppression and agony of farmers. We have decided to hold a massive agitation in the entire state, including in Bijnor. RLD workers and farmers will gather at the collectorate and stage a dharna seeking a ban on wheat import.

Decreasing Import-Duty Not Always a Bad Thing

Indian farmers sow wheat only once a year. Fluctuations in the import-duty affects their sale directly, in one solid blow. Various reasons, including supply deficiency, are responsible for rise and fall in domestic prices.

Due to the deficient and early withdrawal of 2015 monsoon, sowing of the 2016 wheat crop commenced in October under ‘poor’ soil moisture conditions. Deficient to scanty rainfall across the major wheat growing areas (northwest and central India) during planting (October through December) affected the progress of planting, crop establishment, and early crop growth due to antecedent soil moisture stress.

<a href="http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Grain%20and%20Feed%20Annual_New%20Delhi_India_2-26-2016.pdf">USDA, Gain Report, 2016</a>

At the end of last year’s rabi season, wheat cost Rs 1,600 per quintal. By the end of this year’s rabi season (October-March), the prices surged to Rs 2,100-2,150 per quintal.

To cool these prices down, the government had last decreased the import duty to 10 percent from 25 percent, effectively inviting more imports.

Zero Import Duty is Considered Anti-Farmer

However, the 8 December decision to slash the import duty on wheat to zero will affect the domestic price, and the farmers’ pockets will take a massive hit. Speaking to Business Standard, Veena Sharma, Secretary, Roller Flour Millers Federation of India said:

The decision is a big blow for Indian farmers as they would be discouraged from bringing additional area under wheat this year due to the possibility of a price fall. Farmers are normally encouraged to sow crops that fetch higher prices during the sowing season. Bulk consumers in south Indian states would prefer importing to procuring locally.

Panic Among Farmers

As zero-import-duty wheat enters the Indian market just when the Indian crop is about to enter the market, the farmers are forced to make as much money as possible from their produce.

The source of distress may also stem from the lack of an end date to the duty-free import. Farmers may dedicate less of their land to sow wheat in order to provide more space for cash crops and distress-sell their available wheat produce.

Amra Ram, President of All India Kisan Sabha, expressed concern over the duty-free import of wheat, while speaking to The Hindu:

Wheat traders are expecting imports to cross five million tonnes this year. The cost of imported wheat would be far below the MSP of ongoing rabi (Rs. 16,250 a tonne), resulting in crashing domestic wheat prices as the government has no effective procurement mechanism in many states.

The latest decision has left the Union Agriculture Ministry “red-faced”. “The Consumer Affairs and Food, Commerce and Finance ministries” are the ones taking these decisions, a ministry official told The Indian Express.

The possibility of the Central government imposing import duty on wheat before the harvest enters the market in February-March is the last thread of hope for farmers.

(With inputs form The Indian Express, The Hindu, Business Standard, The Times of India)