October 5, 2006

 

India's farm ministry proposes rise in wheat intervention price

 

 

India's agriculture ministry has recommended raising the intervention price of wheat for 2007 by INR100 (US$2.2) to INR750/100kg (US$16.4), a senior government official said Wednesday (Oct 4). 

 

The final decision would be made by the Cabinet Committee on Economic Affairs, the official said.

 

In India, the government purchases wheat from farmers at a set intervention price to maintain buffer stocks and sells it at subsidised rates to the consumer.

 

This year, the government's wheat procurement fell to only 9.2 million tonnes from 14.8 million tonnes in the previous year as private traders offered much higher prices than the government.

 

The government fixed the wheat intervention price for 2006 at INR650/100kg (US$14.23) and later announced an additional bonus of INR50/100kg (US$1.1).

 

The official said a recommendation for a bonus has been made this year as well, but it has been suggested that the amount be set at a later date based on the actual market prices.

 

India's wheat imports in 2007 would depend on the volumes government is able to purchase from farmers at the set intervention price.

 

India's top body on intervention pricing of farm commodities, the Commission on Agricultural Costs and Prices, recommended a wheat intervention price of INR700/100kg for 2007.

 

Officals said an early fixation of a good intervention price would encourage farmers to sow wheat. Plantings are expected to begin next week.

 

However, analysts say farmers may prefer to plant wheat in regions where agro-climatic conditions are suitable, regardless of the government's price as they expect good returns from private sales.

 

India is expected to be the world's largest importer of wheat by volume in year to March 2007 at close to 8.5 million tonnes.

 

This also meant that India is currently implementing one of its largest ever wheat import programmes by volume for a single year, resulting in serious congestion.

 

Some ports are choked, with a waiting time of at least 10 days for wheat shipments to get a berth, an official said, adding that some shipments may have to be diverted elsewhere.

 

The congestion could also affect plans by private companies that have wheat orders, as deliveries have to be completed by December to be eligible for exemption from customs duty.

 

India's Food Secretary T. Nand Kumar, a top bureaucrat overseeing wheat imports, is visiting ports to resolve infrastructural issues and ensure the speedy unloading of cargoes.

 

While there is no shortage of wheat in the local market, a long waiting or unloading time period can increase costs, said the official.

 

India's government wheat stocks as of Sep 1 have declined to 6.72 million tonnes from 11.62 million tonnes in the year-earlier period, a 42.2 percent drop, according to official estimates.