India needs to export foodgrains without further delay

Favourable monsoons have brightened the possibility of foodgrain export in order to reduce the current account deficit- CAD for India. While prices fluctuate in the international market, export we must

Although some parts of the country did not get adequate rainfall, India experienced a timely arrival of southwest monsoon and, on the whole, got an excess of 8% and this augurs well for the ensuing kharif season. Unfortunately, some areas, such as Uttarkhand experienced unprecedented floods, causing huge loss of life, property and standing crops. It will probably take years for this state to return to normalcy, but this has caused irreparable damage in the minds of people there and the whole country. Other areas, such as Odisha, Bihar and Jharkhand had deficient rainfall, but Uttar Pradesh and West Bengal made up due to excess rainfall.


In 2011, India’s rice output was 92.78 million tonnes, and this year, thanks to this good monsoon, this is estimated to be higher, and guestimates are around 100 million tonnes. Such a bumper output will facilitate the implementation of the Food Security programme without much difficulty, provided transportation and distribution arrangements are made methodically. The government is cautious and wants to ensure that foodgrains are made available in time and distributed throughout the country. However, storage facilities continue to be a problem.


While the new crop arrivals will begin soon, the central foodgrains stocks stood at

58.93 million tonnes (MT), consisting of 38.26 MT of wheat and 20.57 MT of rice, which are estimated to be twice the requirements needed to cover the buffer and strategtic reserves. We must export foodgrains without much delay.


Meanwhile, a few things have been worrying the government, such as the CAD (current account deficit) and rupee depreciation. The corrective steps taken to control gold imports have helped but there is the imperative need to accelerate our exports, both foodgrains and industrial products.


Due to the delays in the decision making process, we could not take advantage of

foodgrains export, starting with wheat, which also faced severe international competition from countries like Russia and Ukraine. Their prices are much lower than our own "floor" price and buyers have been flocking to book from them.


Prices fluctuate in the international market, and export we must. The Cabinet

Committee on Economic Affairs cleared the export of 2 MT of wheat, but it is most unlikely that we will be able to get any better than $230-240 per tonne FOB (freight on board) which is prevailing now. Instead of dilly-dallying, we must make the deal and ship the grains out as soon as possible, considering the fact that Food Corporation of India (FCI) spends about Rs25 crore for handling and storage charges per 1,00,000 tonnes. The conditions in FCI godowns need audit and it will be another story if we were to dwell on the warehousing plans of this organisation.


By this export commitment and actual shipments, we must make way for the old stocks to move out and facilitate the kharif crop to come in. In any case, it is not easy to assess the loss arising out of rotting foodgrains, rodents, pilferage and open storage outside the covered warehouses, due to inadequate space.


From the new crop of about 100 million tonnes of rice, government is expected to procure some 35 million tonnes to meet its Food Security programme. Our agricultural front can play a vital role in helping to reduce the CAD. For instance, in the case of the sugar industry, simply by implementing the 5% mandatory ethanol blending programme, government could save upto $340 million per year in oil imports. Soyameal production, for example, is expected to touch 11.5 MT, out of which export orders for 5,00,000 tonnes have been signed at around $515 per tonne, FOB. Iran and Japan have booked 1,00,000 tonnes each while the rest are for the Middle-East. This will also help in reducing our CAD. In the next few weeks, we would be able to at least get an idea of the export commitments from this sector, thanks to the monsoon.

(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.)

10 years ago
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