Our Bureau

New Delhi , Jan. 16

EVEN as the Union Cabinet is slated to clear a new foodgrain export policy that would provide `WTO-compatible' export subsidy of up to Rs 900 per tonne, the private trade is not particularly enthusiastic about the proposal.

The proposal basically envisages exporters undertaking direct grain purchases from mandis and claiming re-imbursement of freight, port handling (`fobbing') and other expenses permitted under the World Trade Organisation (WTO) rules. The re-imbursement, in turn, is subject to their exporting the grain and furnishing the supporting documents in this regard.

This is against exporters sourcing their grains entirely from the Food Corporation of India's (FCI) stocks — an arrangement that enabled the country ship out about 34 million tonnes (mt) of rice and wheat between end-2000 and end-2004, but which has been shelved now following depleting stocks in the Central pool.

While the new policy is largely the Commerce Ministry's brainchild, its actual implementation had, however, hit a roadblock due to concerns over `food security' apparently voiced by the Food Ministry.

But, according to a senior Food Ministry official, who was present at the Grain Asia 2005 conference organised here, ``the issues have all been sorted out at the highest level.'' The policy is expected to receive the Cabinet's assent when it meets in the coming week.

However, exporters feel that the extent of re-imbursement being proposed would be inadequate at current international prices.

Taking the minimum support price of Rs 6,400 per tonne declared for the 2005-06 rabi marketing season (April-June) and adding to this, 10 per cent procurement incidentals (mandi cess, commission agent fee, purchase tax and other local levies), cost of gunny bag and labour (Rs 250), freight from Punjab to Kandla port (Rs 800) and fobbing charges of Rs 200, the total cost of wheat to be shipped without re-imbursement would work out to about Rs 8,300 per tonne or $190 per tonne free-on-board (f.o.b).

Adding a freight cost of $20 per tonne to Dubai, the landed cost of Indian wheat in the West Asia markets would be in the region of $210 per tonne.

On the other hand, wheat from Argentina is quoted at about $106 per tonne fob, which, after including freight cost of $50 per tonne, translates into a landed price of about $160 per tonne in West Asia.

Indian wheat, thus, suffers a cost disadvantage of roughly $50 per tonne, which even a re-imbursement of Rs 900 or $21 per tonne cannot cover.

"Wheat of other origins such as Ukraine, Russia or Kazakhstan would also be similarly cheaper. Our wheat is competitive only with that from Australia, though even here the buyers would prefer Australian wheat simply because it is better graded for diverse uses, ranging from pasta to flour,'' said Mr D.P. Singh, President of the All India Gain Exporters' Association.

He added that the Rs 900-per-tonne proposed re-imbursement made sense when landed prices in Dubai were ruling at $185 per tonne levels a few months back, whereas now they have plunged to $160 per tonne.

Subsidy unlikely to exceed Rs 900/t

The Government is unlikely to offer grain exporters a subsidy beyond Rs 900 per tonne.

Speaking at the Grain Asia 2005 conference, the Planning Commission Member, Prof Abhijit Sen, bluntly stated that "the trade should not be asking us to subsidise export" and "they should device their own means to develop markets and face the challenges". He, however, assured that the Government would ensure that it would not indiscriminately raise MSPs or place a ban on exports. "There will be no return to the bad old days", he said.

Another reason for the Government's cautious approach, sources say, relates to the uncertainty over this year's wheat crop. While the area sown under wheat is satisfactory, a lot would, however, depend on temperatures prevailing during March. The early onset of summer last year had resulted in output falling short of expectations by around 4 mt and a repeat scenario could dampen the prospects for the current year's crop as well.

Also, total grain stocks with FCI as on December 1, 2004, is nearly 15 per cent lower than the 25.4 mt of December 1, 2003. If a less-than-satisfactory wheat crop is followed by poor monsoons, then the country may end up being an importer rather than an exporter of grain.

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