Government allows export of 2 million tonne of wheat to tackle storage crisis

4 JUL, 2012, ET BUREAU
NEW DELHI: The government has allowed traders to export two million tonne of wheat lying in the warehouses of Food Corporation of India, as part of a move to address the storage crisis following a record harvest this season.

The Cabinet Committee on Economic Affairs on Tuesday gave its nod to a proposal mooted by the food ministry, and supported by the PM's economic advisor Chakravarthi Rangarajan, to ship surplus wheat and reduce the burden of carrying costs on the FCI.

The CCEA has decided to immediately allow export of 90,000 tonne of wheat from the bids received by government-run State Trading Corp in its recent tender. A decision on the remaining stock will be taken by a committee, headed by the commerce secretary and comprising officials from the ministries of food and agriculture, besides other stakeholders.

The government is willing to bear the loss of about 1,500 crore between FCI's cost of $328 a tonne and the current value of wheat in the world market. Foreign buyers are offering up to $250 a tonne for Indian wheat. The departments of finance and commerce were earlier opposed to exporting wheat at a loss to the exchequer.

Last month, the commerce ministry floated a tender through STC to discover the value of Indian wheat in the market, which would be the floor price when traders start bidding for allocation. Glencore emerged the highest bidder at $228.

Since then, the global price of wheat has been steadily rising on the back of likely smaller harvests in drought-hit Midwest US, Australia and Russia, the top three exporters of the grain. According to the International Grains Council, global wheat stocks are now the smallest in five years, raising fears of price escalation in the coming months.

"Now the government can invite fresh bids from interested exporters with $228 as the floor price," a food ministry official said.

At least 17 countries, including Japan, Iraq, the UAE, Nigeria and the Philippines, have informally expressed interest in importing Indian wheat, the external affairs ministry recently said. Besides, a government panel last week asked the Punjab government to prepare a proposal for exporting wheat to Pakistan.

India is grappling with a problem of plenty, after a string of good harvests and aggressive procurement led to the accumulation of 57 million tonne of wheat in government warehouses. This is almost twice the quantity of wheat sold in fair price shops annually. India, the world's second biggest wheat grower, has shipped 1.3 million tonne of the grain since the government lifted the export ban on it in September last year.

In the 2011-12-crop year (July-June), wheat production is expected to be 90.23 million tonne.