May 26, 2012
 

India's food ministers to discuss wheat exports

A group of food ministers in India, headed by finance minister Pranab Mukherjee, is planning to discuss next week about wheat exports and additional supplies of the grains through ration shops to ease storage problems.

A panel, headed by Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan, has recommended an export of two million tonnes of wheat from the official reserve and offloading another 13 million tonnes through ration shops and the open market at subsidised rates to tackle the problems of plenty and accommodate fresh crops.

"By and large, we agree with the Rangarajan panel recommendations on handling surplus stocks. Based on those suggestions, we are preparing a note for the EGoM meeting likely to be held next week," food minister KV Thomas said.

At 71.12 million tonnes, granaries have swelled by 20% from a year before, while state-run procurement agencies have a capacity to store roughly 63 million tonnes. India is expecting a record grains production of 252.42 million tonnes, partly driven by an all-time-high wheat output of 90.2 million tonnes.

The commerce ministry is figuring out if wheat exports would be viable or not, and the EGoM would meet after that, he said. The commerce ministry has asked state-run STC to invite a tender to discover export prices, and the price will be known by Thursday (May 24), said a government official.

"The EGoM will take a final call on these suggestions as huge subsidies are involved. The panel has estimated subsidy of around INR17,000 crore (US$170 billion)," Thomas said. The government may have to cough up as much as INR1,500 crore (US$15 billion) subsidy for the exports, as grain prices in the international markets are cheaper than the Indian wheat, the report says.

Agriculture minister Sharad Pawar, commerce minister Anand Sharma and food minister KV Thomas met last Friday to discuss the suggestions so that concrete steps can be taken before the monsoon season starts in June. The meeting also discussed measures to create additional storage space.

The lack of a concrete timeframe for rolling out the proposed food security Act is mainly to be blamed for the brimming granaries, a senior official said last week. "In the absence of a time-frame, food stocks from official stocks were not allowed to be exported, more so in the apprehension of a possible failure of monsoon in 2012. Moreover, high acquisition costs made wheat exports unviable after Russian supplies eased following the drought there and successive years of bumper harvests worsened the storage problem," the official had said.

The government is yet to seek parliamentary approval for the food security Bill, which aims to guarantee subsidised grains to around 64% of the population. The government needs more than 60 million tonnes of grain a year to implement the Act.

The government last year lifted a ban on wheat exports after a gap of four years to keep domestic supplies steady. Despite bumper production in each year since 2009-10, the government didn't allow exports from the official stocks due to the plan to implement the food security Act. However, only 800,000 tonne could be shipped so far, thanks to higher prices and absence from the international market for so long.