19 SEP, 2012, RITURAJ TIWARI, ET BUREAU
NEW DELHI: Rising wheat prices have finally forced government to consider releasing extra wheat in the grain-starved open market. Wheat prices have gone up 23% over the last one year making the staple grain expensive for the common man.
"We have a record stock of wheat. Rising prices is a serious issue. We will release extra 5 million tonne wheat this year from government stock to meet the demand," said food minister K V Thomas.
The government has released 2.3 million tonne of wheat in open market out of 3 million tonne allocated for this fiscal year."It's not enough. Market needs more wheat. Rice prices are also going up. But government intervention is unlikely there," said a ministry official.
This year, India has been estimated to produce a record 103.5 million tonne of rice and 94 million tonne of wheat. People are shelling out 23% more money for wheat and 28% more for rice this year as compared to last year.
According to the latest global food price monitor report by Food and Agriculture Organisation (FAO), a United Nations' body, prices of rice continued to rise in August, reaching record levels in Chennai and Mumbai markets.
"The increase in cereal prices is the result of record procurement levels by the government, following a record 2012 wheat and secondary rice harvests, and a strong pace of exports," it said. FAO said the prices of wheat and rice in Mumbai were ruling at around Rs 26 and Rs 28 per kg.
High prices of cereals, especially of rice and wheat, are due to their shortage in open market. Economists say the question is not about production but about availability.
"The government buys food grains at the guaranteed price to farmers. Around 70% of the marketable surplus is lying with the government creating a demand-supply imbalance and subsequently putting pressure on price," said Madan Sabnavis, chief economist, CARE Ratings.
The rise in grain prices is also due to an increase in global prices and prevailing drought situations in Russia and the US.
The global prices of Indian wheat are ruling around $312 per tonne and of Indian rice between $375-435. India has exported 2.5 million tonne of wheat and more than 4 million tonne of non-basmati rice since September 2011 when a 4-year export ban on them was lifted.
"The global prices of wheat and rice are rising. Traders are cornering grains for export leaving very little for domestic supply to gain more.
Moreover, the domestic market is driven by sentiments as an erratic monsoon this year created sort of panic initially," said PK Joshi, South Asia director of the International Food Policy Research Institute.
Overall food inflation, however, slipped to 9.14% in August from 10.06% in July. Food articles have a 14.3% share in the WPI basket. Data show that pulses have turned expensive by 34.39% in August, wheat by 12.85% and cereals by 10.71% on an annual basis. Similarly, potatoes turned costlier by 68.86% and rice by 10.29%.
"The prices are market-driven. The government doesn't have any control except in wheat and rice," agriculture minister Sharad Pawar said recently in a press conference.
Meanwhile, a late revival and delayed monsoon withdrawal have improved the crop situation limiting damage in rice output and better prospects of wheat crop in the coming rabi season. Grain prices, however, are likely to remain firm even after the new harvest and fresh stock.
"The floor prices of food grains are revised upward every year stoking inflation. This year too, the minimum support price of rice has risen by Rs 170 to Rs 1,250 per quintal making the grain expensive than previous year. So whatever the quantum of production, prices will keep rising," Sabnavis said.
The Commission for Agricultural Costs and Prices (CACP), which advises the government on pricing policy for major farm produce, has recommended that the government keep the minimum support price of wheat unchanged at Rs 1,285 per quintal for the next year beginning April 2013.
It has said the country has a huge stock of over 46 million tonne of wheat and any increase would add to the food subsidy burden. "There was a need to shift to non-grains crops and improve its supply to keep inflation under control," the report said.
This may help in cooling down wheat prices for the new season. "If floor prices remain the same, there would not be much increase in the market price of wheat and if it's a bumper production, the government will have to bear a lower subsidy burden on procurement at an older price leading to a letoff in food inflation," said RS Sharma, senior scientist, Agricultural Policy Research Institute.
NEW DELHI: Rising wheat prices have finally forced government to consider releasing extra wheat in the grain-starved open market. Wheat prices have gone up 23% over the last one year making the staple grain expensive for the common man.
"We have a record stock of wheat. Rising prices is a serious issue. We will release extra 5 million tonne wheat this year from government stock to meet the demand," said food minister K V Thomas.
The government has released 2.3 million tonne of wheat in open market out of 3 million tonne allocated for this fiscal year."It's not enough. Market needs more wheat. Rice prices are also going up. But government intervention is unlikely there," said a ministry official.
This year, India has been estimated to produce a record 103.5 million tonne of rice and 94 million tonne of wheat. People are shelling out 23% more money for wheat and 28% more for rice this year as compared to last year.
According to the latest global food price monitor report by Food and Agriculture Organisation (FAO), a United Nations' body, prices of rice continued to rise in August, reaching record levels in Chennai and Mumbai markets.
"The increase in cereal prices is the result of record procurement levels by the government, following a record 2012 wheat and secondary rice harvests, and a strong pace of exports," it said. FAO said the prices of wheat and rice in Mumbai were ruling at around Rs 26 and Rs 28 per kg.
High prices of cereals, especially of rice and wheat, are due to their shortage in open market. Economists say the question is not about production but about availability.
"The government buys food grains at the guaranteed price to farmers. Around 70% of the marketable surplus is lying with the government creating a demand-supply imbalance and subsequently putting pressure on price," said Madan Sabnavis, chief economist, CARE Ratings.
The rise in grain prices is also due to an increase in global prices and prevailing drought situations in Russia and the US.
The global prices of Indian wheat are ruling around $312 per tonne and of Indian rice between $375-435. India has exported 2.5 million tonne of wheat and more than 4 million tonne of non-basmati rice since September 2011 when a 4-year export ban on them was lifted.
"The global prices of wheat and rice are rising. Traders are cornering grains for export leaving very little for domestic supply to gain more.
Moreover, the domestic market is driven by sentiments as an erratic monsoon this year created sort of panic initially," said PK Joshi, South Asia director of the International Food Policy Research Institute.
Overall food inflation, however, slipped to 9.14% in August from 10.06% in July. Food articles have a 14.3% share in the WPI basket. Data show that pulses have turned expensive by 34.39% in August, wheat by 12.85% and cereals by 10.71% on an annual basis. Similarly, potatoes turned costlier by 68.86% and rice by 10.29%.
"The prices are market-driven. The government doesn't have any control except in wheat and rice," agriculture minister Sharad Pawar said recently in a press conference.
Meanwhile, a late revival and delayed monsoon withdrawal have improved the crop situation limiting damage in rice output and better prospects of wheat crop in the coming rabi season. Grain prices, however, are likely to remain firm even after the new harvest and fresh stock.
"The floor prices of food grains are revised upward every year stoking inflation. This year too, the minimum support price of rice has risen by Rs 170 to Rs 1,250 per quintal making the grain expensive than previous year. So whatever the quantum of production, prices will keep rising," Sabnavis said.
The Commission for Agricultural Costs and Prices (CACP), which advises the government on pricing policy for major farm produce, has recommended that the government keep the minimum support price of wheat unchanged at Rs 1,285 per quintal for the next year beginning April 2013.
It has said the country has a huge stock of over 46 million tonne of wheat and any increase would add to the food subsidy burden. "There was a need to shift to non-grains crops and improve its supply to keep inflation under control," the report said.
This may help in cooling down wheat prices for the new season. "If floor prices remain the same, there would not be much increase in the market price of wheat and if it's a bumper production, the government will have to bear a lower subsidy burden on procurement at an older price leading to a letoff in food inflation," said RS Sharma, senior scientist, Agricultural Policy Research Institute.
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