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Increase agriculture exports instead of resorting to floor price ideas
AK Ramdas 21 February 2014
India must ensure taking the opportunity to push its export, targeting, particularly the Middle East, Africa and South Asia instead of resorting to ‘floor price’ ideas, which may not work all the time
 
According to the statistical data available, thanks to the timely monsoon, which was good and evenly spread out, the Agriculture Ministry projects a record foodgrains output of over 263.20 million tonnes, as against last year's bounty of 257.13 million tonnes.  Rice production has been projected at 106.19 million tonnes and wheat at 95.60 million, coarse cereals at 30.11 mt, pulses at 19.77 mt and oilseeds at 32.98 mt.  Whole sale inflation is reported to have eased to an eight month low of 5.05% for January in food prices, mainly vegetables, with retail inflation also reached a 2 year low!
 
After China, India is the 2nd largest producer of wheat, with the main production being concentrated in UP (31.93%), Punjab (18.21%), Haryana (13.37%),  MP (12.16%), Rajasthan (9.82%) and Bihar (4.98%).  Domestic consumption has been estimated at about 85 to 90 million tonnes (mt).  It may be borne in mind that India is the 3rd largest consumer in the world, after China and the European Union. Though China produces about 121 mt, imports are likely to be around 9 to 9.5 mt this year. India is likely to export about 5.5 mt.
 
As at the beginning of last year, the total storage capacity of Food Corporation of India (FCI) and state agencies was estimated at 72 mt, consisting of 53 mt of covered space and 19 mt under cover and plinth (CAP).  According to Tejinder Narang, a grains trader and analyst of repute, government needs only 30 mt in the central pool by June 2014 for targeted public distribution system and flour millers. The disposable and exportable surplus may vary between 23 mt  and 28 mt and, at an economical cost of Rs20,000 a tonne, the wheat stocks could be worth Rs56,000 crore or roughly $6 billion!  
 
The international market price hovers around $270-275 a tonne and India must ensure taking the opportunity to push its export, targeting, particularly the Middle East, Africa and South Asia instead of resorting to "floor price" ideas, which may not work all the time.
 
One of the well developed markets, for instance, for Indian agricultural products, has been Iran, which has been cooperative and understanding enough to accept, part payment, in rupees, for their oil supplies to India. Indian soya bean production has been estimated at 12.2 mt, out of which as much as 1.91 mt, in the form of soya meal, has gone to Iran, which has become the largest buyer.  Japan and the European Union (EU) also imported the soya meal.  In view of the very large harvests of soya bean in both Brazil and Argentina, reported in the press, it is in our interest to press ahead with supplies to the traditional Indian markets of Iran, Japan and EU, and the advantage gained so far, should not be lost, should the Latin American suppliers resort to push the prices down!
 
In the meantime, there has been a lot of debate about the excess sugar in the country and the urgent need to export raw sugar. The industry sought the government assistance for subsidy, and to overcome various troubles faced, the Food Ministry proposed an export subsidy of Rs2,000 per tonne, while Sharad Pawar, Agriculture Minister recommend Rs3,500 which, finally, was settled at Rs3,333 by the Cabinet Committee for Economic Affairs, confirming that this rate will be reviewed after2 million tonnes have been shipped out of the country.  This subsidy is likely to result in our total raw sugar export of about 4 mt.
 
One other area, where success has been noticed, is in the production of pulses in the country, which has now reached a record 19.8 mt in 2013-14 (estimates) against 18.4 mt last year. Gram or Chana harvest has also been projected to reach 9.8 mt (against 8.8 mt).  The only fly in the ointment has been the ban on export of pulses (except for kabuli chana) for the last several years. This ban should now be lifted, without any fear that our competitors may undermine our sales efforts. The production of pulses the world over has increased.
 
The most important thing to remember is the irrefutable fact of the very large number of Indians living and working in the Middle East.  While exact figures are not available, millions of them toil in the harsh climate there and remit their hard earned foreign exchange back to the country. It is especially for them, there needs to be a consideration of relaxation of rules pertaining to what they need, pulses or other items of day to day use, and such bans should not apply!
 
(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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