Govt may drop grain export ban on harvest hope, stocks

Govt may drop grain export ban on harvest hope, stocks

New Delhi: The government may lift a ban on grain exports, the agriculture minister said, as the world’s second-biggest wheat producer girds for a probable record harvest with stocks already bulging and storage space scarce.

India’s possible return to the export market will put further pressure on global prices that have fallen about 70% from their peak a year ago.

The country has already allowed state-run firms to ship small quantities of wheat and regular grades of rice to neighbours Sri Lanka and Nepal, but analysts say India must export more wheat to accommodate the new crop.

Union agriculture minister Sharad Pawar told reporters a panel of ministers led by finance minister Pranab Mukherjee would meet next week to discuss the issue.

“This will be discussed in the next meeting. We have to take a definite view," Pawar said on Thursday.

Traders and analysts said the government could allow grain exports after May, when the wheat harvesting season ends.

“The government would like to see what the final wheat output is before taking any stand," a trader said.

Low prices have already discouraged planting in Australia, the world’s fourth-largest producer and analysts say India may have to subsidise exports as domestic prices are higher than international rates since official agencies pay remunerative rates to farmers.

India stopped exports of wheat in early 2007 and non-basmati rice in 2008 to ensure smooth domestic supply at reasonable rates, but food prices have risen sharply since the failure of last year’s June-September monsoon.

Food Prices

India’s food price index rose an annual 18% last month, but the government expects a record wheat harvest of 82 million tonnes after favourable winter weather, which traders say will make domestic stockpiles unmanageable.

Pawar said prices of several food items were declining and expected to dip further, indicating adequate domestic supplies.

“India has the ability to export to neighbours," he said.

The government recently approved the sale of small quantities of wheat and rice from government stocks to neighbouring countries.

On 1 February, wheat stocks at warehouses stood at 20.6 million tonnes, up 22.6% from a year earlier, while those of rice rose 26.7% to 25.6 million tonnes.

“A limited wheat quantity can be exported as we are expecting another year of bumper harvest," said S Raghuraman, a Delhi-based analyst.

He said the government would have to supplement such a move by allocating higher grain volumes for public distribution, to rein in food price rises.

India consumes about 76 million tonnes of wheat, equivalent to its harvest in 2006-07, while subsequent harvests have been higher than local demand.

“Storage capacity is full and the new wheat harvest will have to be stored in open spaces," said a trade official who asked not to be identified.