The Hindu Business Line : Foodgrain shipments likely to slow down

RISING grain exports — in terms of both volume and value — over the last three years has no doubt created a sense of euphoria in the Government circles.

Rice and wheat exports have contributed to a considerable extent to a healthy 8.7 per cent increase in export earnings of agricultural and allied products group during 2002-03.

The Food Ministry is happy that the massive grain stocks have now been brought down to a manageable level with the series of steps including exports aimed at liquidation of stocks.

It must, however, be remembered that grain procurement and exports from India have been at a massive cost to the exchequer. For instance, the carrying cost of buffer stock of grains in 2002-03 alone was Rs 6,279 crore.

In addition, the issue price of grains for export is highly subsidised in order to bring about price parity with international market. Food subsidy burden including amount spent on procurement and export subsidies totalled over Rs 22,000 crore last fiscal, a luxury that the country may not be able to afford any more.

While rice and wheat export trends of last three financial years are a cause for cheer, the same level of exports may not be possible during the current fiscal, even-though production prospects look bright and crops across-the-board are most likely to recover from the drought-induced setback of last year.

For 2002-03, rice procurement is down by almost a fourth to 16 mt from 22.1 mt of last year because of fall in production in the wake of drought conditions and open market prices ruling at par or even above the minimum support price.

Similarly, wheat procurement by the Government agencies too is down some 17 per cent to 15.8 mt in 2002-03 from 19 mt last year.

Because of the twin effect of lower procurement and exports, grain stocks have now reached an apparently reasonable level of 35 million tonnes (as of July 1) including 11 mt of rice and 24 mt of wheat, as compared with the minimum stock norm of 10 mt of rice and 14 mt of wheat. At this time last year, total grain stocks were a mind boggling 63 mt.

Without subsidised releases from public stocks, rice and wheat exports from the country are unlikely to show healthy numbers. With the suspension of foodgrains allocation for exports — ostensibly to clear backlog of orders — the pace of shipments is expected to slowdown considerably.

While exporters are free to source their requirement from the open market, such purchases are unlikely to make for competitive pricing for export, aggravated further by high logistics cost.

The Government must let grain exporters fend for themselves. With such large volume of exports last two years, India has subsidised overseas consumers rather than effectively service deserving domestic consumers.

It is time the Centre and the State Governments start to focus on servicing the domestic consumer. With signs of elections round the corner, it would be in the Government's interest to deploy the grain stocks more meaningfully to meet the needs of poor consumers within the country.

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