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Moneylife » Investing » Commodities » India needs to export excess foodgrains

India needs to export excess foodgrains

AK Ramdas | 15/01/2014 12:00 PM | 

There is an urgent need to encourage corporate bodies to invest in building up the infrastructure facilities for storage and exports of foodgrains


In order to support the Food Security Act, the Ministry of Agriculture has estimated that the essential foodgrains in India, to the extent of 53 million tonnes be maintained as a buffer stock. This is based on the assumption that it is safe to have this divided into three categories. A three month buffer stock, at the rate of 5.1 million tonnes (mt), three months reserve and a strategic reserve of 7.5 mt would be sufficient, as a start, as per Tejinder Singh, a well known foodgrain trade analyst.

 

Also, we must remember that as fresh supplies are coming in, stored materials are also being despatched continuously for daily consumption. The foodgrains in overflowing godowns are stored, in large quantities, outside under plastic sheets, tarpaulins etc, which are subject to heavy climatic damage, besides being vulnerable to pilferage and act as a regular storehouse for rodents! Any excess inventory of even 13 to 15 mt are estimated to be worth Rs32,500 crore to Rs37,500 crore!

 

According to information available in the media, as of December 2013, the stock level of foodgrains with the Food Corporation of India (FCI) stood at 45 mt, some 20 million more than required, based on the estimation of 5.1 mt per month. This figure varies from time to time, based on consumption pattern, arrivals and despatches. We must also bear in mind that most state governments have their own food subsidy schemes, and there is no uniformity on a national scale.

 

Our foodgrains should be sold, on export basis, at the best possible prices in the overseas market, and our own minimum "floor price" rules have no bearing on the purchaser. Fresh supplies to the godown are simply placed on the top of the heap of the lot already in, which causes irreparable damage at the bottom!

 

Take the question of wheat stocks in the country and the overseas demand pattern, apart from the aggressive activities of our competitors. At this point of time, cold weather conditions in the US, prime and leading grower and exporter, are indicative of shortfall in their supplies.

 

Indian wheat stocks, as on 1st December, stood at 31 mt, which is the statutory requirement for buffer stock. Agricultural experts estimate a bumper crop this season, amounting to over 95 mt, as wheat acreage in the current rabi season is estimated to be over 302 lakh hectares, thanks to various state schemes in operation. In Madhya Pradesh, the government had announced a bonus of Rs150 per quintal over the minimum support price (MSP) and it appears more farmers increased the wheat acreage! The central government had announced a MSP of Rs1,400 per quintal, an increase of Rs50 over the previous year, to encourage production.

 

As a sequel to the bulging stocks of wheat, export efforts by government authorities, besides private exporters, are bearing fruit. Fortunately, in line with the international market, the government had to reduce the floor price from $300 per tonne to $260 per tonne to push up exports and to literally get rid of the stocks, and to make way for the new crop to come in. Preferred supplies from Black Sea producers were fetching $305 per tonne, while both US and French supplies were quoted at about $ 300 per tonne. However, with the cold wave, there has been interest in the tenders called for by India, prices above the floor price of $260 per tonne has been obtained, such as $282.62 per tonne from Vitol Group, for shipment from Mundhra port, while Al Ghurair of UAE bid $ 283.60 per tonne for shipment from Chennai. India thus plans to export at least two million tonnes of wheat before the new crop starts arriving in April, with hopes to reach four million this fiscal, as there are several tenders on the anvil.

 

Other items like corn (maize) have also made headway in exports, with orders booked for 350,000 tonnes at $216 per tonne. Iran has increased its purchase of basmati rice and soya meal with other items like sugar picking up.

 

Our efforts to push up export of foodgrains is imperative; at the same time, there is an urgent need to encourage corporate bodies to invest in building up the infrastructure facilities for storage, but allocating free land or on long term lease, suitable for this purpose, in every state and more importantly near the ports to facilitate exports. Anything that can be done in these areas to prevent loss of foodgrains due to climatic damage would be most beneficial to the country.

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


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jaideep shirali

jaideep shirali 1 year ago

Our government looks at the trade and economy picture, but the common citizen and revenue is irrelevant to them. It is amazing that a country that has passed the Food Security Bill is desperate to export grain, which it would actually need under the Bill. We would, very predictably, at a later stage, import expensive grain, which we had earlier sold dirt cheap, if one talks about lowering export prices. Basmati rates were lowered to Rs.40 per kg last year or in 2012, but basmati was itself not available to Indian consumers at that low price. As far as Govt policy is considered, some points stand out. Firstly, grain can rot, but cannot be given away free. Secondly, we would continue to be stupid enough to export grain rather than add value to them by converting them into food products. Thirdly, we would rather price exports at ridiculously low levels, but make the same products unavailable to Indian citizens.

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