1st February 2010, ECONOMIC TIMES The issue of rising food prices is not a mere supply-demand imbalance. It is a symptom of a longer-term problem, which requires serious reforms in expenditure and agriculture.

1st February 2010, ECONOMIC TIMES

The issue of rising food prices is not a mere supply-demand imbalance. It is a symptom of a longer-term problem, which requires serious reforms in expenditure and agriculture.

The President requested serious governmental attention to rising prices in her R-Day address. Politicians in the opposition and even the ruling coalition blame the agriculture minister. Early this year, the agriculture minister truthfully told the Cabinet Committee on Costs and Prices, “I am not an astrologer to predict when the prices will come down.”

Though the warnings have been in the public domain for a long time, the government as a whole has not responded with the required urgency. The centre blames the states and exhorts them to invoke the archaic Essential Commodities Act. The multiple of retail to wholesale prices of, for example, potatoes in Delhi rose from 1.6 in October to 2.2 by end November. Some speculative tendency must be occurring. However harassing the trade is a short-term and somewhat date-expired remedy.

Since 2009 till date, the prices of potatoes, sugar, daal, and onions in India have increased by between 40 to 100 percent. Something unusual has been going on for over 5 years, giving signals of a deeper malaise. Between 2004 and 2009, cereals, pulses, sugar, tea, milk, vegetables and edible oil prices doubled or even trebled. More significantly, the trend has been seen not just in India, but globally. In China and East Asia, cassava prices have shot up and are 60 percent over 2009.Was the world alerted to this emerging crisis? Yes.

In November last year, The Economist ran a cover story on how to feed the world. Sarcastically it reported, “If words were food, nobody would go hungry”. At the same time, New York Times ran a feature on how Dutch researchers are working in Wageningen University’s Food Valley “to respond to the dire threat of famine.”

Indian commentators and economists too have been alerting policy makers on the subject. Through a speech in the Bombay Chamber of Commerce last year, I added my small voice of alert: that the world is heading for a food shortage; that India is getting enmeshed in a pulses crisis, but the silver lining is that India has the means to respond positively—and I made a few suggestions on what can be done. I also highlighted the issues through two financial dailies.

At the end of the Second World War, mother earth supported a global population of about 2.5 billion people; today that figure has swelled to over 6 billion and is expected to peak at 9 billion by 2050. It took thousands of years for the world’s population to reach 2.5 billion, but merely another century to more than treble. The per capita availability of arable land, which was 1 acre just a few decades back, will decrease to one third of an acre by 2050.

When the world was faced with a looming food crisis after the Second World War, science and public policy stepped in to modernize the ancient practice of agriculture. Remember Dr Norman Borlaug. The farming fillip was so successful that for many nations, food availability and prices have not been a major public policy issue during the last half century.

In recent years, one third of the world population is experiencing a rapid growth of GDP. It is known that as the per capita GDP crosses $3,000 in ppp terms, the consumption and demand for food sharply accelerates. Countries like China and India need more food—and will continue to do so for the next several years. It is as simple as that.

During this period, a new generation has grown up to whom food availability and prices are of little concern. This shows in the extravagance of food consumption and wastage. In the United States about 50 percent of all food produced is thrown away. Britain squanders 20 million tonnes of food each year and the Japanese $100 billion worth of it in the same period. If the affluent nations stop wasting so much food, the world can perhaps manage with current levels of production and, possibly, feed all of its poor everywhere.

The demand-supply gap for food in India shows that although in the short to medium term, supply will about meet demand requirements, but within a decade, demand will outstrip supply for cereals, pulses, edible oil and sugar. In the year ended November, Indian prices of rice, tea, sugar and milk have gone up by 11 percent.

commodities, the pulses, or daal, crisis is specific to India. A shortage of pulses can have devastating long-term effects on our national nutritional standards. The prices of pulses have reached astronomical levels this year and the government has, expectedly, expressed deep concern.

Therefore the rise in prices is not an aberration; rather, it indicates a trend. Like with onions, which have on occasion become a critical factor in elections past, pulses could turn into a problem in the future.

The daal problem has been worsening gradually and is becoming a silent emergency, like the proverbial frog in the heating water. Indians will suffer the most if India does not find a way out of the pulses crisis, because other societies do not depend as much as us on pod-bearing plants for proteins.

Why did pulses not follow the pattern of wheat, rice and the green revolution? Pulses in India are traditionally considered to be a residual crop, only suited for growth under rain-fed conditions when one can’t grow wheat or rice. The green revolution saw the country taking great strides in increasing the yields of rice and wheat. Along with this, the government’s procurement policy and strategy helped in the promotion of these cereals. There have been no great technology breakthroughs with respect to pulses. Equally, no aggressive plan, commensurate with the crisis, is in place for pulses.

At 638 kilos a hectare, India’s pulses yield is way below that of best-in-class countries, which produce about 1,800 kilos a hectare. It’s obvious that inadequate pest and nutrient management have led to lower yields, and then there are issues such as farmer perceptions of risk and cost, the absence of government procurement, lack of high-yielding varieties of seeds, and poor agricultural infrastructure.

Of all the resources devoted to agriculture, three quarters has gone into food and fertilizer subsidies and under a fourth into longer-term investment into agriculture. This needs to be reversed. Basically reform has bypassed agriculture.

What needs to be done is well-known: firstly, because the subject has been studied by many expert committees and secondly, government does have a huge team of knowledgeable experts who know the remedies. The will to implement measures on a mission mode is the missing piece. The current high prices provide an opportunity to benefit from the farmers’ heightened interest when prices rule high. Past experience shows that the farmer becomes extremely receptive to new technologies and economic stimuli during such periods.

The nation needs a strong partnering between government and private players at such a time. Private sector can do positive things even within the existing policy regime. For example Tata pooled the resources of its various departments and companies to study India’s pulses problem.

With the guidance of noted economist and former minister Prof YK Alagh, a broad plan is being implemented by Tata by partnering with ICRISAT in Karnataka as well as IAMWARM in Tamilnadu. A knowledge exchange website for pulses, www.growmorepulses.com, is being created. It will link a community to inform the many, connect the engaged and excite the passionate.

While rummaging in my library, I reconnected with a book published by Oxford and IBH Publishing entitled “Pulse Production and Opportunities”. It contained the proceedings of a symposium organized by Hindustan Lever Research Foundation in 1982.

Dr Ashok Ganguly, now a Rajya Sabha member, had said in his welcome address almost 30 years ago, “….pulse is such an important integral part of the diet…that unless major steps are taken, we will contribute to calorie malnutrition as well as amino acid deficiencies….”

We were all warned early enough.