Hari Ramachandran, Reuters
New Delhi: Despite prospects of a bumper crop and sizeable stocks, India is likely to tap world markets for wheat in a big way again this year and could once again pay dearly for its needs.
Indian firms might start scouting the market by mid-May, when purchases by state agencies from farmers taper off and output estimates become clear.
Agriculture minister Sharad Pawar has given strong indications that the government will be proactive on imports this year, after scrambling for costly purchases last year as output and stocks fell.
But traders said the government appeared to be erring once again by perking up global wheat prices with its buy signals and by fuelling domestic prices by paying farmers unprecedented rates to build stocks.
Pawar told Parliament the government will raise the price it pays farmers by Rs1,000 per tonne to Rs8,500 for the wheat it needs to rebuild its buffer stocks.
The government is expected to buy 15 million tonnes (mt) to raise stocks. It hopes to have stocks of 4-4.5mt on 1 April, made up mainly of imported wheat.The buffer stocks are used to sell grain to the poor at subsidized prices and meet the needs of welfare schemes. But stocks fell last year, as the government managed to buy only 9.2mt from farmers against the targeted 13mt. Traders and analysts said the government moves smacked of panic after last year’s failure to tie up deals.
Officials maintain the country’s wheat production will rise to more than 72.5mt from last year’s paltry 69.4mt, despite unusual rains in February.
But grain traders say even if official claims were to be believed, the country would need to import big volumes as prices would flare up with farmers getting healthy prices under the government procurement plan.
“The government will have to move cautiously as the prices will rise sharply if they don’t ensure good volumes in the market after procurement,” said Vinod Kapoor, an executive member of the Wheat Products Promotion Society.
He said the government would be able to build stocks with purchases in Punjab, Haryana and Uttar Pradesh but will not be able to check prices because the volume of wheat for sale in the open market will come down. “The government will have to import 3-5mt of wheat this year, they have no other option,” Kapoor said.
A New Delhi-based US attache had said on 26 February that despite higher wheat production in 2007, the overall wheat supply situation is likely to remain tight and 3mt of imports are needed in the the 2007 crop year. Wheat production over the last three years is averaging around 71mt while the country’s more than one billion people annually consume close to 74mt.
India, for the first time in six years, imported 5.5mt of wheat in 2006 as stocks fell after a poor crop and domestic prices rose.