Problem of plenty: Time to relax wheat export ban?

Procurement touches record levels, stocks are lying in open

GN Bureau | May 21, 2010



The government's wheat procurement has hit a record 31 million tonnes, almost six million tonnes more than last year, putting pressure on it to relax the three-year-old export ban on selling the surplus to neighbours.

Export of the major chunk of the procurement is necessary due to the lack of storing facilities as the government is already storing part of the wheat procured in the last two years in open godowns.

The forthcoming monsoon season is also putting pressure on the government to step up grain exports, strengthening prospects of a bigger global wheat glut this year. India will probably ship additional cargoes of wheat to its neighbours like Nepal and Bangladesh and try to make inroads into Southeast Asia and the Middle East.

Sources said the government has piled up nearly seven million tonnes of grain under tarpaulin covers in Punjab and Haryana, two main wheat producing states. The government's concern is that wheat kept in open is prone to rot, decay and rodents' attack.

Even in good weather, it is not safe to stock wheat in the open beyond six months and the main opposition Bharatiya Janata Party is already making noises and even approaching the National Human Rights Commission (NHRC) complaining that huge stocks of wheat kept in open in states like Punjab, Haryana, Uttar Pradesh and Rajasthan have rotted and the same are being supplied to the poor under he PDS.

The Food Corporation of India (FCI) had given an estimate of procuring 26 million tonnes of wheat this year to the government, surpassing the last year's figure because of better yields this year. It, however, found the farmers eager to sell their produce to the government agencies because of the better support prices and absence of the MNCs and other bulk buyers from the mandis.

The wheat arrivals were initially slow as the traders were making spot payments to farmers in villages for lifting the stocks after monsoon but the traders stopped buying after realising that the bumper crop is bound to push down prices and they will be losers if they pile up more in hope of getting higher profits.

If India opens up the exports, it would push down further the benchmark Chicago wheat prices, which have lost around 14 percent this year on prospects of growing global supplies for the third consecutive year. Indian wheat is quoted around $230 to $240 a tonne, including cost and freight, to Bangladesh as against $280 a tonne for Australian prime wheat.

The country’s rice stocks too soared to 26 million tones, more than double the target of 12.2 million and set to soar as forecasts of normal monsoon rainfall from June will help the crop bounce back from a 14 percent fall after last year's drought.

Sources said the government may not completely scrap the ban on export of wheat and non-basmati rice for fear that it would stir up further criticism and public protests against rising food prices, which have surged more than 16 percent in the year to May.

Commerce Secretary Rahul Khullar had hinted relaxation of wheat export ban on May 4 when the procurement had crossed 20 million tonnes. Procurement of another 11 million tonnes in a fortnight has panicked the government to take a quick decision on how to reduce its stocks to manageable levels.

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