Tuesday, November 20, 2012


It was not long ago that the Supreme Court in India admonished the Government for its "pussy footing" about problem of rotting wheat in its granaries. The court went to the extent of even suggesting distribution of the enormous quantity of wheat that could not be stored safely because of lack of storage capacity in its warehouses. Many observers even suggested that wheat should be exported to fetch valuable foreign exchange in stead allowing it to be spoiled because of exposure to weather elements under the CAP storage system. After almost an year GOI seems to have woken up to the reality and the hopelessness of the condition that exists in the country, it has recently allowed limited exports of wheat as well as sugar based on a "stop and go" policy.

According to recent reports GOI estimates that the country should be able to export about 5.5 million tons (mt) during the present financial year if the present trend is sustained till March. While a country like the US is expected to export more than 32 mt, Canada and Australia 18 mt each India's share in the world trade of 135 mt in wheat is less than 5%. Probably India can take consolation that its rank among the wheat exporting countries rose from being 16th last year to 7th this year!. Even the projection of 5.5 mt this year is based on the first half of the year performance which stood at 2.43 mt. Whether the simple arithmetic projection will materialize remains to be see under a regime which is not considered very stable politically. It may be recalled that only in September last year that GOI lifted the ban on wheat export, probably realizing that the available stock would be more than sufficient for ensuring food security.

A worrying factor that can still derail the progressive export policy now in place is the proposed Food Security Bill that will cover almost 70% of the country's population, offering rice and wheat practically free and whether the grains, available in its granaries presently and procured in future, would be adequate to meet this emerging demand. As per the records, GOI is holding a grain stock of about 43 mt presently which is much more than the 22 mt required as buffer stock according to global norms. If and when the Food Security Bill is passed and when the new policy is implemented, the situation may change dramatically and it should not come as a surprise if GOI again clamps on exports.

Any nation wishing to be a significant player in the global trade regime must have a stable and continuing export policy which only can generate the required confidence among the buyers. A fair weather exporter like India cannot be relied upon if the country does not strive to put in place a dynamic export policy which can instill confidence in the international market. If GOI can allow unrestricted exports, it is a question of time before the country can become a major player and such exports can be expected to create a positive backlash in the form of more production, better price realization to the farmer and creation of required infrastructure to maintain international quality for Indian products. What type of justification GOI can provide for exporting wheat at a price of $ 270 per ton, about Rs 14 per kg when the procurement price itself is about that and consumers pay almost double this price in the open market?

Export is inevitable whether one likes it or not because the country produces far in excess of the consumption need of the domestic market. As against an estimated production of 90 mt in the current year, Indian domestic consumption is only about 75 mt and the storage capacity in the country is far less than the surplus generated year after year. Indian agriculture is robust enough to maintain the present level of wheat production more or less and GOI should not have any apprehension in this regard. It is time the country invests on grain storage infrastructure and deploys most modern technologies for safe storage of grains for long time so that India becomes a quality and quantity player in grain exports in the coming years.

One of the excuses trotted out for not allowing export of wheat and sugar was that by doing that world prices would crash affecting global trade adversely. There were also fears that exports would affect domestic prices creating short supply in the market place. Did the export ban prevent price rise of sugar and wheat in the market in India? Absolutely not as Indian consumers have been buying these commodities in the open market at prices at least 10% more than that prevailed last year which is even higher than global prices. Now that limited exports under a controlled regime are allowed, countries like Bangladesh and other developing countries will be benefited to a great extent by getting Indian wheat, the price of which is almost 20-30% cheaper than that being realized by other exporting countries. It is a shame that India wheat cannot fetch good prices in the global market which may probably due to failure to adhere to quality norms set by other importing countries.  


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