Panel calls for export of 2 mt wheat from official reserve

FE BUREAU
Posted: Saturday, May 19, 2012
New Delhi: n ‘Offload 13 mt through ration shops at subsidised rates to tackle problem of plenty’
In a stark contrast to the 2006-08 period, where it was forced to import wheat to tide over a domestic shortfall, India is considering offering subsidies to export the grain to ease storage in its almost-choked warehouses and accommodate fresh crops.

A panel, headed by Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan, has recommended an export of 2 million tonne (mt) of wheat from the official reserve and offloading of another 13 mt through ration shops and the open market at subsidised rates, official sources told FE. The panel said these measures will entail a total subsidy of Rs 17,000 crore. The government may have to cough up as much as Rs 1,500-crore subsidy for the exports, as grain prices in the international markets are cheaper than the Indian wheat.

Agriculture minister Sharad Pawar, commerce minister Anand Sharma and food minister K V Thomas met on Friday to discuss the suggestions. The meeting also discussed measures to create additional storage space.

The lack of a concrete time-frame for rolling out the proposed food security Act is mainly to be blamed for the brimming granaries, a senior official said, asking not to be named. “In the absence of a time-frame, official food stocks were not allowed to be exported, more so due to 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 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 mt of grains a year to implement the Act. At 71.12 mt, granaries have swelled 20% from a year before, while state-run procurement agencies have a capacity to store roughly 63 mt. India is expecting a record grains production of 252.56 mt in the crop year through June, partly driven by an all-time-high wheat output of 90.2 mt.

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. Indian wheat is dearer by around $80 to $90 per tonne than a comparable Russian wheat variety.

India, the world's second-largest grain grower, was forced to import as much as 7.8 mt of wheat between 2006 and 2008 to meet domestic shortage.

The report said the government may have to offer less subsidy on exports per tonne of the grain than if it wishes to sell through the public distribution system. Although it's politically wise to offload through the PDS, even at large discounts, the heavy subsidy burden may force the finance ministry to strike a difficult balance between the two, said a wheat trader.

Separately, commerce minister Sharma said, "We are looking at that (raising wheat exports from government reserves). They will be on a commercial basis. I have asked the PSUs to step in and to be proactive."

He added: “A decision has been taken that a committee of secretaries, chaired by DIPP and commerce secretary Saurabh Chandra, will coordinate the efforts. We are also coordinating with the railways minitry to give the rakes. I have spoken to Mukul Roy who was very prompt in his intervention. Railway board will be the part of coordination." The food ministry will prepare a note for approval and, accordingly, the next step will be taken, he added.