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Harish Damodaran

NEW DELHI, Aug. 8

WILL the Government further hike the issue prices of rice offloaded from the Food Corporation of India's (FCI) godowns for export purposes? Going by the recommendations of the high-level committee (HLC) on `long-term grain policy', it may have to do so very soon.

In its report submitted last week, the HLC, headed by Prof Abhijit Sen, had suggested that the policy of exporting foodgrains from the Central pool at highly subsidised rates ``should be reviewed as soon as stocks come down to 17 million tonnes (mt) and 22 mt for rice and wheat, respectively''.

At these levels, the inventories would be roughly 50 per cent more than the highest normative minimum stocks required to be maintained by FCI as per the Government's buffer stocking policy. These, in turn, amount to 11.80 mt for rice (as on April 1) and 14.3 mt in the case of wheat (as on July 1).

The HLC had said once stocks deplete to the prescribed threshold levels, exporters should not longer be given foodgrains at specially subsidised rates. The export prices should then be pegged at levels not lower than the issue prices under the public distribution system (PDS).

As on July 1, total rice stocks in the Central pool stood at 21.94 mt, which is lower than last year's corresponding level of 22.75 mt and almost three mt below the April 1, level of 24.91 mt. The existing stocks are perilously close to the 17 mt threshold recommended by the HLC. With the acute drought conditions likely to bring down this year's kharif rice production as well procurement for the Central pool and simultaneously also increased allocations under the food for work and assorted relief programmes, there is every possibility of export prices being raised further.

The export prices (port delivery) of raw rice and parboiled rice were originally fixed at Rs 5,650 per tonne and Rs 6,000 per tonne, respectively in May 2001, following which they were increased to Rs 5,760 and Rs 6,115 per tonne with effect from May 11, this year. The prices have been further revised upwards to Rs 5,910 per tonne and Rs 6,265 per tonne, respectively for the period from August 1 to September 30, 2002.

As against this, the PDS issue price for the above poverty line (APL) segment is Rs 8,300 per tonne now. If the HLC's recommendations are considered, the Government would have to further hike the export price of rice towards this level, so as to restrict the subsidy to ``not higher than (that) on PDS sales''.

The move would, no doubt, adversely impact rice exports. During 2001-02, a total quantity of 1.95 mt of rice was lifted from the Central pool for export purposes, with an additional two mt being lifted in the first quarter of the current fiscal alone. The boom in shipments have been entirely due to the massive subsidy on exports from FCI's stocks, enabling Indian rice with 25 per cent brokens to be currently quoted at around $139 per tonne, compared to $170-171 per tonne for comparable rice from Thailand, Vietnam and Pakistan. Even par-boiled rice with five per cent broken from the country is being sold now at $172 per tonne free-on-board.

On the other hand, the case for increase the export price for wheat seems weaker, given that stocks as on July 1, at 41.07 mt, are way above the HLC's threshold of 22 mt. The export price of wheat stood at Rs 4,150 per tonne between October 20, 2000 and March 31, 2001. Subsequently, it was raised to Rs 4,300 per tonne till August 16, 2001, after which it was reduced to Rs 4,200 per tonne. Prices were then gradually raised to Rs 4,250 per tonne from December 1, 2001 to Rs 4,310 per tonne from May 11 this year and Rs 4,350 per tonne with effect from July 1. The Government is currently also offering feed-quality `lustre-loss' wheat at Rs 3,960 per tonne.

Lifting of wheat for exports from the Central pool amounted to 1.66 mt in 2000-01, 2.74 mt in 2001-02 and 1.05 mt during the first quarter of 2002-03. Unlike rice, there has been a perceptible slowdown in wheat shipments, largely on account of supply of cheaper feed quality grain from Ukraine and Russia.

``We are currently only exporting regular milling-grade wheat to West Asia where our grain is used for admixture with superior quality grain. Our lustre-loss wheat is not selling much in South-East Asia now because Ukraine and Russia are offering feed grade wheat for as low as $73 per tonne,'' exporters pointed out.

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