Why is it in the news?

• India has boosted its production of cereal grains by more than 5 times in the past two decades, as reported by the agriculture ministry.
• However, a growing portion of this increase is directed not towards direct human consumption, but for processing into products like bread, biscuits, cakes, noodles, vermicelli, flakes, pizza base, and others, or for manufacturing animal feed, starch, alcohol, and ethanol fuel. This shift can be observed in data from official household consumption expenditure surveys (HCES).

More about the news

• The most recent HCES report from the National Sample Survey Office indicates a consistent decrease in the amount of cereals consumed per person per month, dropping from 12.72 kg to 9.61 kg in rural areas and from 10.42 kg to 8.05 kg in urban regions between 1999-2000 and 2022-23.
• Overall, the per capita consumption, using weights based on the rural-urban distribution of sample households from HCES, has reduced from 11.78 to 8.97 kg during this timeframe.
• When this weighted average consumption is multiplied by 12 months and the country’s population, it calculates the annual total consumption of cereals by Indian households, either in direct form or in processed-at-home form. This total has shown only a slight increase, from 148.4 million tonnes (mt) in 1999-2000 to 153.1 mt in 2022-23, and has actually declined over the past decade.
• Despite stagnant or declining direct household consumption, cereal production has significantly risen from 196.4 mt in 1999-2000 to 303.6 mt in 2022-23.
• Furthermore, the disparity between officially estimated production of cereals and household consumption based on HCES has widened from around 48 mt in 1999-2000 and 29.5 mt in 2004-05 to nearly 151 mt in 2022-23.

Where is this excess production going

• In the fiscal year 2021-22 (April to March), India set a new record by exporting 32.3 million tonnes of cereals, with 21.2 million tonnes being rice, 7.2 million tonnes wheat, and 3.9 million tonnes other grains, primarily maize.
• Even in the year 2022-23, cereal exports remained high at 30.7 million tonnes, comprising 22.3 million tonnes of rice, 4.7 million tonnes of wheat, and 3.6 million tonnes of other grains.
• However, these exports of 31-32 million tonnes represented only a fifth of the over 150 million tonnes difference between cereal production and direct household consumption in 2022-23.
• Another significant portion of cereals is consumed by households in processed forms such as bread, biscuits, noodles, etc. Assuming this additional consumption to be 25% above direct cereal consumption, it amounts to approximately 38 million tonnes.
• Moreover, a considerable quantity of cereal grains is utilized in the manufacturing of feed or industrial starch. The agriculture ministry estimates that India produced 38.1 million tonnes of maize in 2022-23, with the vast majority being used in poultry, livestock, aqua feed, or processed into starch for various industries like paper, textile, pharmaceutical, food, and beverages.
• In addition, cereals like maize, barley, and millets such as bajra (pearl millet), jowar (sorghum), and ragi (finger millet) were produced at 57.3 million tonnes, of which less than 5 million tonnes were directly consumed in Indian households. Much of the consumption of these coarse grains occurs indirectly through milk, eggs, and meat from cows, buffaloes, and poultry birds.
• Beyond feed and starch production, cereal grains are also used in the fermentation process to produce alcohol, which is then distilled into rectified/industrial spirit or ethanol of high purity.
• The ethanol blending program by the government has encouraged the installation of multi-feed distilleries in sugar mills, allowing them to utilize grains during the off-season for producing ethanol. This shift highlights that cereals are not only food and feed sources but also crucial as fuel grains in various industries.

The unexplained surplus

• Adding 32 million tonnes in exports, 38 million tonnes used in processed food, and 50-55 million tonnes diverted for feed, starch making, and fermentation purposes (rough estimates) to directly meet household consumption of 150-155 million tonnes would bring the total annual demand for cereals to 275-280 million tonnes at best.
• This demand is significantly below the estimated domestic cereal output of over 300 million tonnes.
• The surplus grain is absorbed by government agencies and stored in the Food Corporation of India’s warehouses.
• During the 2022-23 crop year (July-June), approximately 56.9 million tonnes of rice and 26.2 million tonnes of wheat were procured, exceeding the total annual cereal requirement of 59-60 million tonnes for the public distribution system (PDS).

Conclusion

• As per the National Food Security Act, about 813.5 million individuals receive 5 kg of wheat or rice per month free of charge through the PDS (previously priced at Rs 2 and Rs 3 per kg, respectively). This entitlement covers more than half of the monthly per capita cereal consumption, which stands at 9.61 kg in rural areas and 8.05 kg in urban India for 2022-23.
• If the agriculture ministry’s cereal output projections are accurate, the country is generating a surplus of at least 25 million tonnes of grain annually, leading to downward pressure on market prices and potentially increasing government stocks.