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Harish Damodaran

NEW DELHI, Nov. 17

EVEN as the Government has steeply hiked the issue prices of foodgrains offloaded from the Food Corporation of India's (FCI) godowns for export purposes, there is still some respite for exporters: Export prices of feed-grade `lustre-loss' wheat have been left unchanged at Rs 3,960 per tonne.

The decision is significant considering that out of the nearly nine million tonnes (mt) of wheat exported from the country since November 2000 — when the drive to export grains from FCI's stocks began — roughly 4 mt has been accounted for by lustre-loss wheat.

The lustre-loss wheat is basically the grain that was procured from Punjab and Haryana during the 2001-02 rabi marketing season (April-May). round 12 mt of such wheat — which suffered damage on account of unseasonal rains prior to harvest, rendering it unfit for direct milling purposes — was purchased during that season. Of this about 6 mt have been disposed off so far through exports (4 mt) and sales to domestic roller flour mills (2 mt), who have been blending this grain with the regular milling-quality wheat.

It is estimated that the FCI is saddled even now with roughly 6 mt of lustre-loss wheat. ``The move to leave the export price for lustre-loss wheat unchanged is welcome because it leaves a window still open for exporters'', a trader from a leading multinational exporting firm pointed out.

The lustre-loss wheat is being exported mainly to South-East Asian destinations, where it is used either as feed (as in South Korea) or for blending with better-quality Australian white wheat (as in Indonesia and Philippines). Indian exporters are currently offering this wheat at $93-94 per tonne free-on-board, which comes to $104-105 per tonne cost & freight (c&f) at South-East Asia.

``Our lustre-loss wheat is mainly competing with feed-grade wheat from Ukraine and Russia, who are offering it at around $80 per tonne f.o.b or $105 per tonne c&f. The decision to keep FCI's export price unchanged at Rs 3,960 per tonne will help Indian wheat to remain competitive vis-a-vis feed-grade quality of Black Sea origin'', the trader pointed out.

What is noteworthy about the Rs 3,960 per tonne price is that it is even below FCI's central issue price of Rs 4,150 per tonne for wheat channelised to the below poverty line (BPL) segment. This is quite in variance with the Union Cabinet's decision on March 23, 2002, which conferred full powers to FCI's High Level Committee (HLC) to fix export prices for foodgrains, subject to these not being lower than the BPL issue price.

FCI officials have defended the lower price by noting that the lustre-loss wheat was of feed-grade, though they have not been able to counter the point that the same wheat is also being made available to domestic (and foreign) millers for blending with regular milling-grade wheat.

Prominent exporters of wheat from the country include Cargill, Adani Exports and the state-owned MMTC Ltd. Cargill alone is understood to have cumulatively shipped out over 1.6 mt, of which half has been lustre-loss wheat.

The decision not to hike the export price of lustre-loss wheat comes even as the same for regular-quality wheat has been increased sharply from Rs 4,560 to Rs 4,810 per tonne for the old crop and from Rs 4,600 to Rs 4,950 per tonne for the new crop procured in the 2002-03 rabi marketing season. Thus, the price differential between lustre-loss and regular wheat now works out to almost $20 per tonne.

It appears that the Government is sending out a clear signal that it is not keen to export good quality wheat at the present, especially keeping in view the likelihood of international prices firming up in the coming months owing to poor harvests in the US, Canada and Australia.

The export prices of rice, too, have been raised substantially from Rs 5,910 to Rs 6,260 for raw rice and from Rs 6,265 to Rs 6,615 for par-boiled rice. The price increase has been even higher in the case of rice procured during the current 2002-03 season (October-September) — from Rs 5,910 to Rs 6,510 per tonne (raw rice) and from Rs 6,265 to Rs 6,865 per tonne.

All the price increases take effect from January 1, 2003, barring that for the newly procured rice, for which the hike is immediate.

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