The Sunday Times The Economic

“Agricultural policy should aim at the most cost-effective means of attaining self-sufficiency, not food self-sufficiency at any cost. The development of adequate storage and milling facilities and a better marketing and distribution system is a crying need for the "golden grain"

The export of paddy or rice to India is more a measure of failure in our agricultural policies than an indicator of success. It is an irrational economic move that is costly to the country rather than a benefit. It contravenes the laws of economics and goes against the basis and rationale of trade between countries. On the same basis we could export milk to New Zealand, sugar to Cuba, rubber to Malaysia and coconut to the Philippines. The irrationality of rice exports to India has many facets of economic absurdity. It reminds one of the old expression, "Carrying coal to New Castle".

First of all let us not delude ourselves that we are a rice surplus country. A rice surplus country is one where there are adequate stocks to meet the possibility of low harvests in subsequent years. There should be adequate stocks to meet the year-in-year-out demand. Merely because the country had good harvests in two successive years does not make the country self-sufficient in rice in a sustained manner. It is an observed phenomenon that the country has a paddy production cycle of about three years of good harvests and then a succession of a few bad crop failures due to either drought or floods or both. On this historical evidence we could expect low harvests in the coming year when we would require importing rice, as there would be inadequate stocks from the years of good harvests. The export of rice is therefore an indication that the country has failed to develop facilities for storing paddy and rice.

India has been a grain surplus country for over a decade. In the 1970s India was transformed from a food deficit country to a food surplus country. India attained food grain sufficiency in the 1970s and has sustained it since. It has had adequate grain stocks to meet the year-to year fluctuations in production. In 2003 India had food grain stocks of 50 million metric tonnes. There was no need for India to import rice from Sri Lanka, a country with a much higher cost of production for rice. In fact Sri Lanka has one of the highest costs of production of Asian countries although the average yields are higher than those of our neighbours. Therefore there is no prospect of exporting rice.

Why would India that has a surplus of rice and produces rice at a lower cost import it from Sri Lanka? The reasons are not clear. Perhaps it was because Sri Lanka offered the rice at a lower than international price. It was a small quantity and apart from considerations of any economic gain to India, it was perhaps an act of goodwill. This paddy bought at Rs. 16.50 per bushel was exported at probably about one half the cost price and the government would have sustained a loss of about Rs. 9 to 10 per kg of paddy exported. The rationale for this act of placing another burden on the people was twofold. It had a problem of inadequate storage facilities and it wanted to make the nation feel that we had attained more than self-sufficiency. The country and successive governments have been obsessed with the idea of attaining self-sufficiency in rice and boasting about it so much so that they have been and are economically irrational. It is not the first time such a course of action was resorted to. Many years ago there was a huge fuss about exporting an inconsequential amount of rice to Indonesia. In the subsequent years the country imported much larger amounts of rice. So much for self-sufficiency in rice. Are we again on the verge of a similar occurrence?

Agricultural policy should aim at the most cost-effective means of attaining self-sufficiency, not food self-sufficiency at any cost. The development of adequate storage and milling facilities and a better marketing and distribution system is a crying need for the "golden grain". It is also time to give farmers the choice of crops to cultivate rather than tie them down by laws that prevent them from cultivating other higher value crops. There is an economic rationale to systematically and cautiously divert some low yielding wet zone paddy lands to other higher productive uses like inland fisheries. If we can generate a real surplus in rice, we should diversify it to industrial uses, including the production of alcohol such as Sake. One must also be mindful of the fact that there are about a quarter of our population that is malnourished and that there would be around 4 million more mouths to feed in the next quarter century. Therefore exporting rice is irrational.