You can’t look at the farm in isolation and expect to win the battle on food inflation. With West Asia ratcheting up energy and fertiliser prices and making the currency jumpy, CII has put forward a plan to treat these three as a single front. It’s about shielding growth, the farmer and the home.
To be sure, the government’s initial moves have been useful in taking the edge off fuel costs and making sure gas goes where it’s needed most. But CII cautions that there will be no end to the uncertainty, so you need reforms with some staying power to keep prices in check.
Why CII wants a single 3Fs strategy
There is a direct line from one to the other, they say. When fuel gets pricier, so does fertiliser, and then you see it in your food bill. Add in some logistics and exchange-rate wobbles and you have fiscal pressure and a hit to what families can afford.
It is a matter of structure. India is importing 88 per cent of its crude, 90 per cent of phosphates and a quarter of its urea. And with much of the crude and LNG coming through the Strait of Hormuz, any trouble in West Asia is a vulnerability we can’t ignore.
“Fuel is the input for fertiliser, which in turn is for food, and all of it ends up in the equation for inflation and welfare,” says Chandrajit Banerjee, CII’s Director General. “They are not separate issues.”
Fuel: immediate risk, biggest lever
Where to start? CII points to energy as the place to make the most immediate dent in import reliance. They want to see a quicker move to cleaner transport fuels, other ways to cook and a more robust domestic buffer.
Take ethanol. We need to be clear and quick on that. CII is after a straight path from E22 to E30 in line with the new BIS rules, with flex-fuel vehicles being taken up in the states that produce the ethanol.
What CII proposes on energy
CII outlined a mix of near-term switches and structural hedges to build resilience and lower the fuel bill:
– Roll out an LNG corridor for long-haul trucking
– Offer vehicle incentives and transparent refuelling norms
– Shift part of LPG demand to electric cooking
– Use ethanol-based cooking and green hydrogen where feasible
– Expand domestic oil and gas exploration
– Add to the Strategic Petroleum Reserve
– Diversify crude sourcing and supply routes
– Scale up coal gasification and methanol blending
– Boost bio-CNG production
– Grow nuclear power, including Small Modular Reactors
“You can’t just put a band-aid on it,” Banerjee says. “Building out our own alternatives is what secures the economy in the long run.”
Fertiliser subsidies: shift how support is delivered
Then there is the strain on the subsidy side. With global fertiliser rates high and us depending on DAP, phosphoric acid and LNG, the bill is mounting. CII wants to make sure the support for the farmer is there, but done right.
That means overhauling how we deliver subsidies with some data behind it. A Direct Benefit Transfer via digital banking and mobile, tied to soil health and land records, would be the way to go. They’re even suggesting we try it in a few districts first.
And on urea, they’d like to see it brought into the Nutrient Based Subsidy system to put a lid on nitrogen use and the damage it does to the soil. “We are not looking to pull back support,” Banerjee is at pains to point out.
Food inflation: buffers now, bottlenecks later
We did have a record harvest last year, which is some comfort. But don’t count on it. A soft rupee, monsoons you can’t put your finger on, and the cost of running a farm could still put upward pressure on things, especially with vegetables and oils.
So why not put some onion and tomato from the buffer out there before the lean months in August and November? Enforce the Essential Commodities Act a little more rigorously. A better cold chain for the stuff that won’t keep will do some good too.
“Food inflation is the first thing to hit those who can least afford it,” Banerjee says. “You have to be firm but not over the top. In the end, it comes down to having the right storage, the right kind of market sense and a shorter trip from the farm to the table.”
What comes next
For India to be resilient, we have to stop working in silos. If the ministries can get on the same page, a 3Fs playbook can do more than just muffle a price shock; it can put us on a steadier course.
“If you do it with some thought, it will protect us now and set us up for the future,” he says.
