Rising food prices

Rising food prices
eKantipur, 6-May-08
Editorial

The specter of rising food prices is hurting Nepali consumers. That escalating agro-commodity prices are pushing up inflation is reason enough for the government to worry. In an attempt to temper the high prices, the government has come up with two measures — banning wheat exports and selling rice from the inventory of the Nepal Food Corporation. However, the food price rise is not an aberration only for Nepal; it is now a global phenomenon caused by rising consumption in emerging economies, escalating fuel prices and massive use of grain for producing bio-fuel. It is projected that agro-prices will stay on an upward trajectory, at least for the next several months. But our production has not kept pace with the increase in demand. Against this background, the government's steps are virtually meaningless. More needs to be done.

The government should crack down on the practice of hoarding, which normally happens in Nepal at times of deficit. On top of that, a string of policy measures is necessary to address supply-side shortages. It might make sense for the government to ban the export of wheat to keep domestic prices under control in the short run. However, bans and other restrictions have to be imposed without hurting the interests of producers at home. Anyway, all these are short-term solutions. Food security calls for long-term planning in order to correct the widening mismatch between demand and supply. Food grains do not fetch attractive prices, and farmers are migrating to cash crops. There is a need to incentivize farmers to produce cereal crops, as income from farming is inadequate to cover increasing input costs.

One way to make food grain cultivation profitable is to increase productivity. Output enhancement depends on how efficiently and quickly we can upgrade cultivation technology, boost private sector investment on a massive scale and develop basic infrastructure like irrigation, agricultural roads and electrification. A number of reports have blamed low-quality fertilizers and insecticides for the almost stagnant productivity of major food crops. A steep rise in yield is possible if we judiciously use available technologies, and for that we need to educate our farmers. We should also seriously think of reintroducing subsidies to install basic infrastructure like shallow tube wells to raise the yield per hectare of cereal crops like rice and wheat, which is far below the regional average. As such, the focus ought to be on increasing productivity and plugging leakages in procurement and distribution if food prices are to be kept under check. All such policies have to benefit both producers and consumers. We cannot betray the interests of the urban poor, the rural landless and small and marginal farmers. We must ensure that they do not lose because of shortages and soaring prices. This is possible only by raising income levels by commercializing farming and fostering economic growth.