May 18, 2007

 

India ups intervention prices for rice, oilseeds

 

 

India announced Thursday (May 16) a significant hike in intervention prices of all major agricultural commodities, including rice, cotton, oilseeds and corn, for the marketing year that begins in October 2007 to give a push to stagnant farm output and to augment local supplies.

 

Intervention prices of both common and "A" grades of paddy, or husked rice, were raised by Rp650 a tonne each to Rp6,450/tonne and Rp6,750/tonne, respectively.

 

In India, the government sets the intervention price for agricultural commodities and makes purchases if market rates slip below those prices, to ensure remunerative incomes for farmers.

 

For rice, the government is the single largest buyer in the country, procuring up to a whopping 28 million tonnes from farmers each year to run subsidised sale programmes.

 

However, since the government gave a bonus of Rp400/tonnene to farmers, in addition to the intervention price in 2006/07, the actual hike in intervention prices, on the year, will work out to be only Rp250/tonne for 2007/08.

 

The new intervention prices were announced by Agriculture and Food Minister Sharad Pawar after a meeting of the federal cabinet.

 

Pawar said the intervention price for yellow soybeans has been increased by Rp300/tonne to Rp10,500/tonne and that of black soybeans by Rp100/tonne to Rp9,100/tonne.

 

He said the intervention price for sunflowers has been raised to Rp15,100/tonne from Rp15,000/tonne.

 

The intervention price for sesame seed has been increased to Rp15,800/tonne from Rp15,600/tonne and that of nigerseed to Rp12,400/tonne from Rp12,200/tonne.

 

Pawar said the intervention price for common grade, or medium staple, cotton has been increased to Rp18,000/tonne from Rp17,700/tonne. He said the corresponding price for long staple cotton has been increased by Rp400/tonne to Rp20,300/tonne.

 

He said the intervention price for corn has been increased by Rp800/tonne to Rp6,200/tonnene.

 

India's foodgrains output has been stagnant for nearly 10 years and the government is working on a slew of incentives for farmers including better prices, easy credit and improvement of irrigation facilities to give the next decisive push to production and reduce dependence on imports.

 

In terms of volume, India is one of the world's largest importers of edible oils, wheat and pulses.  

 

Government yet to decide on time period for bonus on wheat buys  

 

Pawar said the government has not yet made a decision on whether to discontinue by month's end the Rp1,000/tonne bonus, being given in addition to the intervention price of Rp7,500/tonne, to farmers from whom state-run agencies are procuring wheat.

 

Like rice, the government is also the single largest buyer of wheat by volume to run its subsidised sale programmes, but its procurement has slipped steadily over the past few years from around 19 million tonnes to barely 9.0-10.0 million tonnes.

 

Due to the shortfall, the government had to import a whopping 5.5 million tonnes of wheat in calendar year 2006, its first such purchase in six years. It needs at least 11.0-12.0 million tonnes of wheat to run subsidised sale programmes each year, besides maintaining a permanent buffer stock of 4.0 million tonnes.

 

While the government was maintaining a 4.6 million-tonnes buffer stock of wheat as of April 1, its incremental procurement from the new harvest in 2007, as of May 17, is estimated at only 9.7 million tonnes compared with a marginally lower 9.2 million tonnes a year earlier.

 

Despite a bonus of Rp1,000/tonne over the intervention price, slow procurement of wheat by the government, for the second year in a row, is being attributed to holding back of stocks by farmers in anticipation of even higher prices in later months when the local harvest is over.

 

To encourage farmers to sell their wheat in the market at the earliest, officials in the food ministry recently proposed that a deadline should be set beyond which the bonus over procurement price would be eliminated.

 

However, Pawar said discussion on the issue is ongoing.

 

He said the government's wheat-procurement programme is going on as scheduled.

 

Last week, he said, despite adequate stocks, the government will still import anywhere between 4.0 million and 5.0 million tonnes wheat in 2007 to meet any unexpected calamities such as drought.