March 14, 2007

 

India eyes Rp250-750/tonne hike in wheat support price

 

 

India's food ministry has recommended a further hike of Rp250-750 (US$5.65-16.97) a tonne in intervention price for wheat in 2007 to enable adequate local government buys and avoid imports, a senior government official said Tuesday (Mar 13).

 

The intervention or minimum support price at which the government is to purchase wheat from farmers in 2007 has already been increased to Rp7,500/tonne from Rp7,000/tonne, a year earlier.

 

The local purchases are scheduled to begin on April 1 and volumes bought by the government will determine whether India will import wheat this year.

 

"Three options have been given to consider further increases in the wheat support price by Rp250/tonne, or Rp500/tonne, or Rp750/tonne. The final decision in this regard will be taken by the federal cabinet," the official told Dow Jones Newswires.

 

He said a panel of ministers headed by Minister for External Affairs Pranab Mukherjee reviewed the wheat price and availability situation in the country Tuesday.

 

In India, the government buys wheat from farmers at a set intervention price and then sells it to consumers at subsidised rates.

 

Last year, traders purchased wheat from farmers at prices higher than the intervention price set by the government. This led to a shortfall in the government's procurement to run the subsidised sale programmes which had to be met through 5.5 million tonnes in imports, India's first such purchase from abroad in over six years and largest by volume in several decades.

 

In India, the cold arithmetic of wheat trade is such that any shortfall in government's local procurement from farmers at the predetermined intervention price, results in a proportional volume of imports to run subsidised sale programmes.

 

As a result, the government is extremely keen this year to maximise its own purchases of wheat by offering an attractive intervention or minimum support price to farmers.