How do paddy farmers gain? How they are losers?
Serious issues! From agricultural production to agri trade!

India emerges as a serious player in the international market.
For the first time, after a very long period we hear of international trade in Indian rice! This is reflected in the recent price hike for paddy cultivation.

Government hikes paddy price!  Now Rs. 1310 a quintal!

This new hike is to support farmers to go for more paddy cultivation in the face of drought, delayed monsoon. Also, there is now a growth in demand for rice in the international market.

Also the hike is given to pulse, oilseeds and cotton cultivation. As the government is also hiking the gas prices, almost doubled the domestic gas, it is inevitable that farming in India is becoming more than just subsistence level farming, also the subsistence-level mindset.

From cultivation of food and the distribution and the series of late policies at the hands of the government and also the National Advisory Council, not to speak of the self-appointed guardians of the saviours of the poor, the economists from Amartya Sen to others like the members of the NAC and the last the top political leadership, agriculture is still a game played for winning elections, easily, despite costing an earth!

Now, there are certain welcome features of the trade in agriculture, in rice in particular. While India has a food Security Bill, Thailand, another big paddy cultivator and a competitive rice exporter, has come out with a paddy pledge system there.

Thailand is a leading world rice producer and exporter. Thailand’s premium quality rice and also the quantity make Thailand a direct competitor for India. Though Thailand has a long history of top rice exporter, unlike India which was so famous for its food deficits and only lately, there is this new status as a top rice exporter. Thailand exported about 10.5 million tonnes (mt) of rice in 2010-11. It slipped to 7 mt in 2011-12 and about 8 mt in 2012-13. While this decline, despite its annual output remaining unchanged at 21 mt Exports of rice from Thailand constitute about 35 to 50 per cent.
On the other hand India emerged as a top exporter of rice only in 2012-13 by shipping about 10.5 mt. Thailand is still trying to stabilise its strength. Why?

There are many reasons. One is to directly intervene in the market and not to let things dictated by the market forces. There are critics and sceptics about the Thailand’s latest intervention policy in the rice market.

In Sept 2011 when India lifted the curb on non-basmati exports Indian traders stepped in and things started to change dramatically, to say the least. White rice was contracted  for dollar 410 to 430 a tonne while Thai quoted 600 dollars a tonne and Vietnam, another serious player in the international rice market pledged 575 dollars tonne while Indian prices were around 333 dollars a tonne.

Indian rice prices were lower than Thailand’s and Vietnam”s. However Indian entry changed the scenario and price corrections took place. Vietnam, now Pakistan and Thailand and other “origins”, except Thailand, corrected their prices. Due to the competitions India could export only 6.5 to 7 mt tonnes in 2013-14.

Thailand raised the paddy procurement price by 50 per cent to 500 dollars per tonne.

Thailand also pursued a election-related populism in rice price and rice price procurement, Thailand’s current Prime Minister Yingluck Shinwatara came with her paddy pledge scheme, her party, Pheu Thai Party promised to pay almost 50 per cent more price and today around 13 billion dollar worth of paddy is stored under a government controlled bank and there is a limited quantity only available in the open market.  In India there is a 90 per cent subsidy on wheat and rice on that quantity at Rs. 2-3 per kg.

^7 per cent of people are to be supplied with this subsidised paddy/rice. There is 77 mt paddy in the FCI godowns. With production at 190 mt there is now an over-supply in the godowns at the rate of 31 mt of surplus. This surplus is estimated to be about worth 12 billion US dollars.

Both countries suffer from lack of storage space and also suffer from leakages and also rot in the open space!
BAAC-Bank of Agriculture and Agricultural Co-operatives of Thailand-collects or hoards paddy as collateral. In exchange the farmers are paid. Many warehouses are in fact millers’ premises only. Farmers enjoy the funds and what happens to the stored paddy nobody is sure!

Thai system and India’s system are very similar.Except the price differences in Thailand is sometimes 40-50 per cent higher than what we have in India. Since October 2011, the Thai government has suffered a loss of 4.4 billion US dollars for disposing of paddy bought at an economic loss.

Like India too Thai government runs a heavy deficit, 5.6 per cent while the acceptable limit is only 3 per cent. There are international pressures on Thai government from Moody’s credit rating agency, as in the case of India. Also, there are critical issues as to how to protect the farmers’ interest with the interests of the consumer who also double up as voters in election times.

Loan melas, loan waivers, now, higher paddy prices!

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