As food and commodity prices have flared up the world over but slowed down recently, it is not a crisis situation in India and “we are trying early to manage the availability” through a slew of measures on the supply side, the Secretary, Food, Consumer Affairs and Public Distribution, T. Nanda Kumar, said.
Kumar told Business Line: “At this point of time, Indian prices are probably the lowest on most commodities, particularly in essential items, and we intend to keep it that way in the larger interests of the poor consumers”. He, however, hastened to state that “we do not want to deny the farmers a fair price and therefore, correspondingly there is a substantial increase in minimum support price (MSP) which is addressing the concerns of the farmers”.
Stating that food security is of concern and “we need to be a little cautious”, Mr Kumar said: “We cannot take large risks on food security”. He said that as of now, both rice and wheat productions were looking “quite good” but this does not preclude “our taking advance action to keep stocks for the future particularly in the context of what happened to global prices last year”.
He said as far as stocks by FCI go, “we expect to have a closing stock on April 1, 2008 of one million tonnes more in wheat and hopefully about 2 million tonnes more in rice above buffer stock norms”. With economy growing at a higher gear and Rs 18,000 crore going into employment (NREGS) which beneficiaries might use on more food, the demand for food that was estimated at a conservative basis might go up and that is the cushion we are looking into,” Kumar noted.
Keeping stores
He said earlier there was a comfort factor when global prices were either low or reasonable and the country had enough foreign exchange to import. But now the comfort factor of price had gone and availability, too, had diminished. With many large consumers for wheat in the world, any one of them having a supply shock could also dip into the same market and that is why “we would like to be very careful with retaining as much stocks as we have got, though this does not mean we give up exports”.
Kumar said in the case of rice exports, the Government view is that lower-priced variety of rice should be retained in the country so that the higher-priced and premium varieties get exported. In the global market, price of Thailand rice is $600-650 per tonne and our non-basmati premium varieties’ minimum export price is at $650 per tonne. As basmati rice can legitimately fetch prices above $900 per tonne, “basmati MEP of India is at $900 per tonne to prevent misclassification and not to prevent basmati rice exports,” he added.
Edible oil factors
On the edible oil front, he said, “we imported 4.7 million tonnes last year and I don’t see why we cannot import similar or a slightly higher quantity as import is going to stay. We have to manage edible oil prices below Rs 60 per kg, at the same time not disturbing the edible oil seed farmers”.
That is why a raft of steps including ban on exports and cuts in duty on imported oil were clamped. The argument that non-edible oil should not be banned is a fair one and “in fact there is no intention and if there is some correction to be made that could be made”. Like in the case of rice, the Government is trying to retain the common edible oil for domestic use, he said.
Alongside, he said, the Government has been effecting hike in MSP of important crops and in the case of rice and wheat, this has been particularly sharp in the last two years and the incentivisation has already begun. “There are no guarantees that the international prices would stay at the same higher level, already prices have started coming down”.
On banning of futures in commodities, Kumar said what happened on the Chicago Board of Trade (CBoT) last year and the way wheat behaved was an eye-opener. “I am not sure whether it is pure price discovery or whether commodities have become the most attractive investment portfolio. The jury is still out on this".
Kumar told Business Line: “At this point of time, Indian prices are probably the lowest on most commodities, particularly in essential items, and we intend to keep it that way in the larger interests of the poor consumers”. He, however, hastened to state that “we do not want to deny the farmers a fair price and therefore, correspondingly there is a substantial increase in minimum support price (MSP) which is addressing the concerns of the farmers”.
Stating that food security is of concern and “we need to be a little cautious”, Mr Kumar said: “We cannot take large risks on food security”. He said that as of now, both rice and wheat productions were looking “quite good” but this does not preclude “our taking advance action to keep stocks for the future particularly in the context of what happened to global prices last year”.
He said as far as stocks by FCI go, “we expect to have a closing stock on April 1, 2008 of one million tonnes more in wheat and hopefully about 2 million tonnes more in rice above buffer stock norms”. With economy growing at a higher gear and Rs 18,000 crore going into employment (NREGS) which beneficiaries might use on more food, the demand for food that was estimated at a conservative basis might go up and that is the cushion we are looking into,” Kumar noted.
Keeping stores
He said earlier there was a comfort factor when global prices were either low or reasonable and the country had enough foreign exchange to import. But now the comfort factor of price had gone and availability, too, had diminished. With many large consumers for wheat in the world, any one of them having a supply shock could also dip into the same market and that is why “we would like to be very careful with retaining as much stocks as we have got, though this does not mean we give up exports”.
Kumar said in the case of rice exports, the Government view is that lower-priced variety of rice should be retained in the country so that the higher-priced and premium varieties get exported. In the global market, price of Thailand rice is $600-650 per tonne and our non-basmati premium varieties’ minimum export price is at $650 per tonne. As basmati rice can legitimately fetch prices above $900 per tonne, “basmati MEP of India is at $900 per tonne to prevent misclassification and not to prevent basmati rice exports,” he added.
Edible oil factors
On the edible oil front, he said, “we imported 4.7 million tonnes last year and I don’t see why we cannot import similar or a slightly higher quantity as import is going to stay. We have to manage edible oil prices below Rs 60 per kg, at the same time not disturbing the edible oil seed farmers”.
That is why a raft of steps including ban on exports and cuts in duty on imported oil were clamped. The argument that non-edible oil should not be banned is a fair one and “in fact there is no intention and if there is some correction to be made that could be made”. Like in the case of rice, the Government is trying to retain the common edible oil for domestic use, he said.
Alongside, he said, the Government has been effecting hike in MSP of important crops and in the case of rice and wheat, this has been particularly sharp in the last two years and the incentivisation has already begun. “There are no guarantees that the international prices would stay at the same higher level, already prices have started coming down”.
On banning of futures in commodities, Kumar said what happened on the Chicago Board of Trade (CBoT) last year and the way wheat behaved was an eye-opener. “I am not sure whether it is pure price discovery or whether commodities have become the most attractive investment portfolio. The jury is still out on this".
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