June 6, 2006

 

India may reduce wheat imports by a cut in subsidised sales

 

 

India is considering a substantial cut to its subsidised wheat sale programme, by reducing the requirement for wheat imports by 2 million tonnes, a senior government official said Monday (Jun 5).

 

"Several proposals have been placed before the federal cabinet for reducing the government's burden of subsidised wheat sales and thereby imports beyond the currently planned 3.5 million tonnes," the official said.

 

He said two of the options are to increase the subsidised price at which food grains are sold or to cut the volumes sold.

 

The government has already reduced the allocation of wheat for southern and north-eastern provinces to the actual-average sales of the last three years, he said.

 

Increasingly, the government is substituting wheat with rice in its subsidised sale programmes in these provinces.

 

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

 

Each Indian household is entitled to purchase 35 kilogrammes of food grains a month at the subsidised prices from government-run shops.

 

India badly needs to import wheat because the government's local purchases for the year until Mar 2007 only amount to 9.2 million tonnes, against the 17 million tonnes it needed to run its subsidised sale programmes last year.

 

The government wants to reduce this requirement to at least 15 million tonnes or even lower through demand-side management.

 

According to the official, supplies cannot be augmented through imports beyond a certain limit, so demand for subsidised wheat also needs to be checked.

 

India has embarked on one of its largest ever wheat import programmes for a single year and plans to buy at least 3.5 million tonnes, of which orders for 1.3 million tonnes have already been placed.

 

The program may involve 60 to 100 shipments at Indian ports, with many of the deliveries scheduled between July and September, when the country receives its annual monsoon rains.

 

"If the cabinet wants us to set everything aside and just keep importing wheat indefinitely...that won't be sustainable," said the official.

 

Industry officials, however, said government may still have to import another 2 million tonnes, in addition to the currently planned 3.5 million tonnes, to run its programmes.

 

An increase in prices and a reduction in sales under these programmes is a politically sensitive step. A similar decision in January had to be put on hold, in the face of acute opposition by several parties.