July 22, 2010

 

 

Seasonal rains have drenched northern India, washing away fears of a second consecutive major drought, but have created grain storage problem and resulted in spoilage.

 

Following one of India's worst-ever droughts last year, the federal government cornered the bulk of local wheat and rice output by paying high prices, fixed by the state, that private buyers were reluctant to match. As a result, state-run warehouses that were already brimming ran out of space.

 

So state agencies are storing sacks of grain covered with thin plastic sheets in open fields. Heavy showers have already washed away some of the stocks in the open and more rains in coming days may spoil even more of the stored grain.

 

The rotting grains have contributed to India's rising food prices, stoking inflation and hurting the poor despite plentiful rains and a bumper crop. Local wheat prices have risen about 12% to INR1,230 (US$26.11) per 100 kilograms in the past three months.

 

No official estimates have been made of how much grain may be lost because of the storage problems. Some experts say it could run up to as much as 5%-10% of total production, including the impact of weather, rodent attacks and theft.

 

Pressure is rising on the government to sell its surplus, even at a loss. "Whatever stock you need and some more for an emergency, keep it. If you have more grain that is surplus, then you should sell," said D.P. Singh, chairman of the All India Grain Exporters Association.

 

The federal government has been trying to unload some of the overflowing stock by offering it for sale to state governments in India. But states have been reluctant to pay the high price set by the government, which aims to avoid selling at a large loss.

 

India allocated 4.2 million tonnes of wheat to be sold to state governments and private millers from federal stocks between October 2009 and September 2010. Only 1.7 million tonnes have been sold.