India Govt Skips Grain Export Price Revision

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The foodgrain exports gravy train seems to have come to a halt with the Food Corporation of India (FCI) refraining from announcing export prices of rice and wheat for the January-March 2004 quarter.

Normally, FCI declares the prices at which exporters are issued grains from the Central pool for any quarter 45 days in advance. Further, exporters are given an additional month for lifting the grain from the FCI godowns at the announced prices. By this logic, the export prices for January-March should have been announced by November 15 and these would have been effectively valid till end-April 2004.

"We have decided to dispense with the arrangement of fixing export prices 45 days in advance. There is no point in FCI locking itself into a pre-committed price in the present scenario where international prices are heading northwards. Why should FCI be engaged in futures trading?" officials in the Food Ministry revealed.

While hardening prices may be the official explanation, the trade, however, believes that the decision not to announce prices for the coming quarter has more to do with the Government's overall changed stance vis-a-vis exports. "As it is, FCI has stopped issuing fresh allocation or release orders for exports since August 10. In such a scenario, it is only a matter of academic interest whether or not it announces export prices for January-March," an exporter said.

The officials, on their part, denied any formal move to review the existing export policy. "There is no going slow on exports. Our position is that since a significant part of the quantities lifted by exporters has not yet been physically shipped out and FCI, too, has not allocated the entire grain for which payments have been made to it, it makes more sense to have this backlog cleared first," they said.

During the period November 2000 to September 2003, a total quantity of 22.5 million tonnes (mt) of foodgrains has been physically exported out of the country, with exporters cumulatively lifting 30.1 mt and making payments for 34.2 mt.

As per the latest information, about 600 rail wagons (each of 2,350 tonnes) are yet to be delivered to exporters against valid allocation and release orders for which payments have already been received. "The backlog for rice has been fully cleared. What remains is only wheat, which should be cleared by the year-end," the officials said.

But the question is whether FCI has enough surplus grains in its warehouses for exports. The total foodgrains stock in the Central pool, as on October 1, stood at 23.68 mt, the lowest for that date since the 15.34 mt level of 1997 and a far cry from the peak of 64.83 mt attained on June 1, 2002. Rice stocks, at 5.24 mt as on October 1, were not only below the normative minimum buffer of 6.50 mt for that date, but corresponded to the lowest since the 5.1-mt level of October 1, 1992. Even assuming procurement of 19 mt - 20 mt of rice during the current marketing season, there would be little surplus grain left for exports, after taking into account allocations for the regular targeted public distribution system (about 12 mt annually) and another 5 mt-6 mt for the Sampoorna Grameen Vikas Yojana, mid-day meals and other welfare schemes.

The position is better in wheat, where stocks, at 18.43 mt as on October 1, are higher than the buffer norm of 11.60 mt for that date. But even here, the Government is faced with the problem of rising domestic prices. Wheat dara is currently quoting at Rs 750 - Rs 760 per quintal in the Delhi market, against Rs 640 - Rs 650 per quintal a year ago. With the new crop scheduled to arrive only from April, the Government may have to accord greater priority to fulfil the grain requirements of domestic flour millers rather than exporters.

Source:Business Line