welcome to serious business on ND TV, 30 minutes of hard business news, one topic, one speaker and a conversation that's relevant to you. I'm manvi. I don't need to tell you this. We all know it, but let's just revisit it for some context. On May 12th, I paid ₹50 a kilo for tomatoes. On June 28th, I paid ₹99 a kilo for tomatoes, so prices doubled in 45 days and on July 15th I paid ₹220 a kilo for tomatoes, so prices went up 2.2 times in just 15 days. I have all the bills from the local Subi shop to prove it. Now. What you and I have experienced at the subs shop is what has got captured in the consumer Price index, or inflation for June 2023. Food inflation is clearly visible now. Unseasonal extreme uneven rainfall is the root cause for the food inflation, the experts say, So we can all see the logic in that, so there's no debate, but unseasonal extreme weather conditions are due to climate change. And let's just take that as a given. For now, Each extreme weather event causes price shocks and the economic consequences are becoming more personal, and they're hitting us fairly regularly. Renowned agricultural economist Dr Show Gulati says that while tomato prices may cool in August, September, onion prices are likely to rise. So brace yourself. What does all of this mean then? Well, actually, it generates a whole bunch of questions. Are policy makers and the central bank Reserve Bank of India thinking about how climate change impacts, food prices and food security? Are short term measures like export bans and stocking limits working? Actually, they're more relevant for wheat, rice and sugar. Anyway, Is there a medium term plan in place? Well, uh, theoretically, there is Operation Greens, which was announced in the Union Budget speech of 2018 19, initially covering tomatoes, onions, potatoes 2020. It was extended to cover all vegetables and fruits, among other things. Uh, the focus under Operation A Greens is to develop a value chain for fruits and vegetables, and the reason that's important is because it helps India build up stocks of perishable items like vegetables and fruit. So how is Operation greens progressing now? These are some of the questions that I've come up with and I hope that you find them relevant as well. But between us, we are not experts, which is why it gives me great pleasure to welcome Doctor Ashok Galati, a renowned agricultural economist very well regarded with decades of experience. Currently serving as distinguished professor at Iria, which is the Indian Council for Research on International Economic Relations. Dr. Galati, Thank you so much for your time on ND TV. Thank you for having me. I want to cover so much. And perhaps the time is always going to be short. Fundamental question. First, what's happening to production and supply in order of priority cereals, first milk as well and vegetables? How is that impacting prices? Well, prices, food, inflation There is an upside risk. It has gone up. The trend of CP that was coming down has reversed and is likely to go up if preemptive action is not taken. The largest contribution in CPI inflation Consumer price index inflation in June is from cereals. It's about 12% inflation rate. But given the weight in the consumption basket of the consumer, which is high, the contribution to inflation is 22%. That's the highest. Now why that is happening. There is a reason. On the wheat side, our stocks had gone down last year. Production estimates were the trade believes much lower than what the government had said. There was a big gap even this year, when the government is saying we are going to have 112 113 million tonnes, the trade feels it's 100 and 506 million tonnes. So there is a gap in wheat. So what did we do last year? We put first an export ban on wheat. Then this time in June, we started putting stocking limits on wheat. My feeling is we are using the policy instruments of 19 sixties when we didn't have the foreign exchange to buy anything. The fact is, if your production has gone down, or at least the trade believes that it has gone down. How do you kill those expectations? Inflationary expectations by importing and you have so much $600 billion in your reserves. What if you import 5 million tonnes of wheat and kill those inflationary expectations? You have an import duty on wheat of 40%. There is no need you bring it down to 5% 10% and the inflationary pressures will cool rice. Right now we have put export ban on white rice Our stocks with FC I are three times the buffer stock norms three times and still we have put export controls. Maybe that erratic rainfall is there and therefore the coming crop may not be as good. But I started getting calls and emails from Africa that there is an emergency today. I got an email from Liberia that there is an emergency, that what is going to happen to prices and how we are going to afford So in a year, especially when India is playing G 20 presidency and I think they have done a great thing that include African Union as a member of the G 20 on a regular basis. Then they have to walk the talk in terms of the interest of the global South And India is the biggest rice exporter in the world. 40% of global exports are by India, So if you suddenly ban white rice exports, it flares up the prices of those. I don't think there was any need for that. You could have played much better. But in the inflation of this, we must remember that we are giving free wheat and free rice 55 kilogrammes per person per month to more than 800 million people. So for whom are you trying to suppress the prices of wheat and rice for you and me at the cost of who? Ultimately it is the farmers, prices will go down and farmers equally need better incentives for their production, so that will be missing. So I'm trying not to go off in many different directions because you've certainly set me off in many directions. I want to continue this stock, take milk, sort of flying below the radar. But worrying signals elaborate milk. The you know, in CP I basket. There are 299 commodities out of which milk actually is bigger than any commodity. The weight of milk. You know, we are the largest producer of milk in the world. But last year what had happened? Our production was more or less stagnant. It was 222 million tonnes. A previous year was only 221 million tonnes. And that was because of lumpy skin disease. And, uh uh, primarily, uh, that hit the livestock sector and the production stagnated. The demand is continuously going up again. The solution you could have control. You know, the feed costs went up dramatically. So farmers say our costs have gone up. Uh, you see, and you see mother Dairy Mother Dairy in a year, roughly 4 to 5 times it increase. The prices is the leader. So they increase three times the prices that leads to increased prices and therefore the CPA pressure. Now I would love to see again the skimmed milk powder and the butter. These two things combine and make liquid milk right. The import duty on skimmed milk powder is 60% and on butter is 40%. If you are short of supplies, bring it down. Your prices are above the world prices. If they are above the world prices and you have such high duties, you are creating an inefficient structure of the industry. I can imagine 5 10% protection you want to give to your producers, but 60% protection. And under that you want to develop a sector, it will collapse. That's not the way to go and create a comparative sector. So I would urge the government If you want to control inflation and especially food inflation, you need to play the trade policy. They import policy more liberally because you have enough foreign exchange and there is no harm when you want to export more. We are the largest exporter of rice. Why can't we import 5 million tonnes of wheat or 2 million tonnes of uh, you know, skimmed milk powder or butter to reconstitute milk here? So I think our policy metrics is still being dominated by more of, uh, you know, self sufficiency in a turkey which is not relevant in the times that we live in. It can't be. If you want self sufficiency, please have self sufficiency in crude oil. The whole economy will come to a standstill If anything goes wrong. 88% is being imported. OK, we've talked about cereals. We've talked about milk and I'm glad we've actually reversed the order. Uh, that I started our conversation with, uh today which was all about tomatoes on the vegetable side as well. Cover that and give us a sense of what to expect in the coming months, whether it's cereals, whether it's milk, whether it's vegetables, any particular vegetables, where are prices headed? Vegetable prices get a shock from unseasonal rains or even heat waves. OK, so the extreme weather events that you started off with climate change and the frequency and intensity of extreme weather events is going to increase that you take it. Granted. If that is going to increase, then all the crops will have difficulty. You know, if there is a heat wave, wheat will suffer immediately. Tomatoes will suffer. But this time tomato production was literally wiped out quite a bit in the region, which is one of the largest market, the largest market in the country, that region was hit by unseasonal rains and then past attacks and the market arrivals in dropped by two third. So only one third was coming than what the regular normally comes. And that gets reflected in the spike in the prices that you pay. ₹220. A actually went up to 2 70 as well, but you know what to watch out for our reading and our research shows, Uh, in the second half of August, Uh, we are expecting the Maharashtra crop to come in. Normally at this time, Himachal crop starts coming in. It comes from different parts of the country. And, uh, but Himachal has been hit. Uh, you know, by all these landslides and massive floods. So, uh, the logistics problem is a big problem right now. So my feeling is from second or third week of August, the prices will start coming down, and in September, it will stabilise. But unfortunately, our research shows, uh, onion is going to give you tears from September October, and that's where the pressure is going to be. Because that crop, all the stocks that were kept of, uh, Rubby onion, uh, quite a bit of that has been damaged, some by excessive rains. And earlier there was a heat. So that stock is towards the end. And before the new crop comes, that is the period for two months. Uh, if you pay ₹220 for tomatoes, don't be surprised if you will be paying at least ₹100 for onions. So that's going to be so that raises an issue. Do we have a policy and you know, and that that's exactly what I want to ask you. And I understand that policies for each bucket are going to be different because you've got cereals. You've got milk, you've got vegetables. Uh, but if it's possible to address all three buckets, do you see a medium term plan actually taking shape being implemented? And it's actually truly relevant to the producers and to the consumers, you know, for non perishable commodities, the buffer, stock and trade policy. A combination of the two is the best way to stabilise the prices in the markets. Buffer stocking we do. When the harvest comes, you procure and you start releasing when there is a lean season. That's the buffer stocking operation and wheat and rice. We do a lot of buffer stocking for our public distribution system, so we have protected the most vulnerable, you know, 800 million people. So you have protected them from wheat and rice. It's a free nowhere in the world ever. Perhaps this type of a big programme has been launched now for you and me. We can easily be a you know, a little bit of right. But some stabilisation is necessary so that you can do if your buffer stocks have depleted trade policy import policy because you are keeping exchange foreign exchange reserves. That's your buffer stock. So I mean, you know, if I can paraphrase you, the buffer stock policy is in play. It's, you know, adequate. Uh, it's the, uh, trade policy that needs to be a much more sort of dynamic and liberal in in an, in a sense, perishable items. What have perishable. This is a challenge. And to stabilise the prices of perishables, you need good processing. In advanced countries, hardly people use fresh tomatoes like this the way we use every day at home. They will have tomato, you know, for all the or anything else. It's tomato. So that means when the production comes the process, they are processing 70 to 80% of the produce. We don't even process 5% of the produce. So I think some processing activities and there is a glut and I can bet you will see after three months, four months, there will be so much of tomato. It will be selling at ₹5 a KG ₹10 a KG for the farmer, so it actually will protect the farmers exactly So you need to process at least 10 to 15% of the produce of perishables to stabilise uh, the you know, the rock bottom prices at that time you process. And when there is a spike in the prices, you switch to the, uh, process Same thing in onion, you have to either store it or you have to process in dehydrated onions and use that. Unfortunately, these are still very new products in the Indian cuisine, and they need to be promoted to stabilise the Operation green that you referred to in 2018 19. And I remember, uh, you know who actually uh, uh initiated this. We were in talk with him at that time, and at one time even honourable Prime Minister was saying our top priority is top tomatoes, onions and potatoes because those prices had to be stabilised. And you would remember once onion prices had gone through the roof and, uh, government, uh, was literally unseated, uh, from onion prices. So he gave 500 cars at that time, and we were in talk, and even he asked, What should we do next? So you create this out of a board like ND DB. We created National Dairy Development Board for development of dairy Sector. You create a separate vegetable board and pick up a person who is like Korean who is passionate to stabilise the value chains of, uh, vegetables because full value chain approach has to be adopted. That hasn't happened. It's currently still housed in the Ministry of Food Processing. Nobody knows who is in charge, who is accountable. Nothing. You need it like a concerted sort of action plan, and that hasn't happened. That hasn't happened, unfortunately, and I would still submit to the government because this problem will not go away. And at the election time, If onion prices are ₹150 a kg, it can give you sleepless nights, a quick break and then we return. You're watching serious business on ND TV I'm Manvi. And in conversation today with eminent agricultural economist Dr Aho Galati, we're talking about food supply. We're talking about food prices, and now it's time for a quick round of simple, frequently asked questions drawn from the comments that we see on ND TV dot com. Indian farmers Do they benefit when consumers are paying high prices for something like we keep circling back to tomatoes. But you know, when we are paying high prices for tomatoes, what's actually the farmer experience? You know, the normal process is that in case of perishables, farmers get about one third of what the consumer pays one third tomatoes, onions, potatoes. Roughly. When there is a glut of those commodities, Farmer gets even 1/4 or 1/5 of what the consumer is paying. But when there is a spike, then everybody gains in the chain. Farmer also gets a good price, but the intermediaries they make a So the share of the farmer in the higher prices, you know, one third doesn't really kind of go up dramatically. It goes up a little bit, but in absolute terms, the largest chunk is taken away by the intermediaries because they are the ones who are dealing with you and me. You know, retailers because there are stages and other things also have to be seen. There's a very broad question, But since we've seen this, um, come up again and again, you know, climate change is here to stay. Extreme weather conditions are here to stay. Um, do we need to be thinking about changing, uh, food, growing food eating patterns. I don't think that will happen. The more realistic thing is invest more in research and development of the seeds, which are going to be more climate resilient. They can be heat waves. They can also survive under flood conditions. So what we are spending on agriculture, R and D is peanuts. We give to lack of subsidy on fertilisers. But we don't spend even 20,000 cars on agriculture, R and D. The returns there are very, very high. So I would say the IC R Budget Indian Council of Agriculture budgeted amount this year is 9500 cars that needs to be doubled simply to cope with the starting point. That's the so you have to focus on R and D. Secondly, you need to know how to use your water well, when there is a flood, how to store it, charge your ground water through check dams and other means. And when there is a drought or heat conditions, how to use that so water management will require a reorientation. I don't think you are, and my consumption patterns are going to change. OK, well, Seth final question, uh, the Reserve Bank of India. It's charged to its sort of mapping, managing inflation, eye on the ball. Does it have its sort of eye on the ball? You know what kind of, uh, again unfair question to put to you, but, uh, surely we can start anticipating some RB action. Now, you know, this is interesting that the Reserve Bank of India is to tame inflation. It's in their mandate and their is 6% on the upper ban, 4% as normal and 2% minimum. Unfortunately, our CPA basket food is 45.9% rate food and beverages, whereas in US food is only 14% weight. Now. How RB a can handle tomato inflation? I had done a piece earlier. Tomato humbles RB I. That was last year. I would say tomato humbles RB yet again this year. What can they do? They have to work very closely with the government because this food and the shocks that will come from climate change RB a cannot handle. It is ultimately the government's responsibility and therefore buffer stocking policy, the trade policy and buffer stocking of water that's going to be so you're saying there's a rationale to actually changing the composition of the CP IC P. I needs to be changed because we are still working with a consumption basket of 2011. That's too old. Our consumption patterns have changed, and I think we need to update the very weights in the CP i basket. Because we are overestimating the inflation because of the high rate of food in the consumption basket, which is based on 2011, uh, consumption survey, I think by 2023 those rates have dramatically changed. Well, actually, you've presented a whole bunch of solutions. So, uh, the reality check, Doctor Gulati, thank you very much for presenting us with that when it comes to food in India and also for mapping are things that the government could do could prioritise which will actually bring meaningful change on the ground for producers and for consumers. Thank you for joining us on serious business on ND TV. Thank you. Thank you very much for having me on ND TV
