The Hindu Business Line : Foodgrain sector has little to savour; export subsidy plan may be non-starter

THERE is nothing in the Union Budget for the grain trade, including export. With a paltry Rs 0.01 crore being allocated towards the foodgrain export subsidy, it is clear that the much awaited `WTO-compatible' subsidy policy, mooted by the Commerce Ministry, would be a non-starter this year.

The Government's lack of enthusiasm for promoting foodgrain exports is mainly due to the not-so-comfortable public stocks position.

As on January 1, 2005, total grain stocks stood at 216.97 lakh tonnes (lt), comprising 127.63 lt of rice and 89.31 lt of wheat. This is against corresponding stocks of 250.16 lt on January 1, 2004 (117.27 lt of rice and 126.87 lt of wheat) and the peak level of 648.30 lt reached on June 1, 2002 (234.01 lt rice and 413.17 lt wheat).

The current stocks are higher than the normative minimum buffer of 168 lt (84 lt each of rice and wheat), necessary to be maintained in the central pool operated by the Food Corporation of India . But these would be adequate only to meet the requirements of the public distribution system (PDS) and food-for-work programmes, such as the Sampoorna Grameen Rozgar Yojana (SGRY). That leaves very little grain for exports.

An indication of this is the fact that of the total foodgrain offtake of 287.28 lt from the central pool during April-December 2004, a mere 9.66 lt has been earmarked for exports, while the bulk of 202.14 lt has been provided towards the targeted PDS and another 37.97 for the SGRY. But during 2003-04, out of the total offtake of 493.32 lt, the targeted PDS claimed 241.94 lt and the SGRY 106.14 lt. And even after all this, a total quantity of 103.08 lt was lifted by exporters during the year.

"Two years back, there was enough grain for all purposes. Today, we have to be more judicious in the use of our stocks," a Food Ministry official said. However, there is nothing in the Budget to allow exporters to ship grain sourced from private purchases and claim WTO-compatible re-imbursement on transport and marketing expenses. To make maters worse, the latest Rail Budget has raised freight charges on non-PDS grain by a hefty 33 per cent, making exports further uncompetitive.

But for the Government, the decline in public stocks has helped contain its spiralling food subsidy without resorting to any hikes in PDS issue prices. For 2005-06, the total food subsidy bill has been budgeted at Rs 26,200 crore, marginally higher than the revised estimate of Rs 25,800 crore in the current fiscal.

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