Kharif paddy, key to global food security too
Published on: September 30, 2020.
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With Chinese reserves depleting and floods threatening rice farming in Bangladesh, India will be significant to the rice market.
India’s agriculture and food supply chain have demonstrated ample resilience during Covid. Despite the hiccups during the start of the lockdown, which coincided with rabi harvesting, most notably of wheat, potato, cotton, and many fruits and vegetables, the sector has done fairly well.
After five months since the Covid pandemic started, India is in good shape on the food security front. In late March, coinciding with the start of the lockdown, the government announced 5 kg additional free grains per month for three months (April to June) for 80 crore National Food Security Act beneficiaries on top of the highly subsidised grains they receive through the Public Distribution System (PDS).
In addition, the government increased the PDS subsidised grains from 5 to 7 kg per month for each beneficiary. This means that each beneficiary received 12 kg grains per month in the past three months. The record amount of grains in Food Corporation of India (FCI) godowns enabled the government to provide free grains on top of the PDS subsidised grains.
Even after providing additional free grains for three months, the FCI had a record amount of grains, close to 98 million tonne (42 mt of milled rice equivalent and 56 mt of wheat) as of June 2020 in its warehouses (Chart 1). Many experts consider this reserve uneconomical and wasteful of scarce government resources. In pure economic terms, this is true, but the real value of a grain reserve should not be judged merely by its economic losses. Imagine what would have happened during the lockdown without the grain reserve.
One might think of India’s 98 mt grain reserve as excessive but it is still a lot smaller than China’s, which can meet its domestic demand for more than a year, according to a recent report by Global Times. In 2019-20, China’s domestic consumption of rice and wheat was 271 mt . In other words, India’s grain reserve is slightly more than a third of China’s (Chart 2).
What lies ahead
The government recently announced the extension of free rations of 5 kg of grains for the next five months, until November. In total, beneficiaries will receive 10 kg of grains per month in the next five months. The government will need 40 mt by November to fulfil this commitment. In other words, India will have about 58 mt grains in FCI warehouses by end November, which is still significantly higher than the buffer-stock norm of around 40 mt.
The kharif paddy crop seems to be in good shape with early onset of monsoon this year. According to the Department of Agriculture, Cooperation and Farmers’ Welfare, as of August 7, paddy planting has been hit a record 40 million hectare (mh) compared to 38.57 m ha last year, and the average of 31.17 m ha for 2015 to 2019. The planting of other kharif crops such as pulses, oilseeds and millets is also up thanks to early onset of monsoon.
On the flip side, early monsoon has brought early floods to some parts. In Assam, thousands of hectares of farmland has been affected. Paddy sowing here has fallen behind Now, flooding has started in Bihar, where concerns arose this year because of 30 per cent unfinished embankment repairs and anti-erosion due to the lockdown. This will also be a concern for other States.
Whatever happens in India to its kharif paddy harvest has huge implications on both Indian and the global food security. With depleted Chinese rice reserves and continuing floods, the importance of India in the world rice market is bigger than ever. Thousands of hectares of paddy crop have been submerged in Bangladesh as well. There will be more bad news from other countries as we progress through the kharif season due to the extreme weather conditions such as flood, drought, and cyclone.
India, as the largest exporter of rice in the world, will have the dual responsibility of maintaining both domestic and global food security. Any unilateral action by India on the export front will rock the world grain market affecting millions of poor consumers.
