Finance Ministry Not Willing To Subsidise Wheat Exports.

NEW DELHI: The decision to allow wheat exports may come to nothing, having got caught up inter-ministerial wrangling. The agriculture ministry is keen to get wheat shipped out, but at current international prices exports are not viable.

"Export of wheat is commercially possible only if the government gives subsidy to traders as domestic prices at the moment are much higher than international prices," an agriculture ministry official told ET.

The finance ministry is not ready to subsidise wheat exports because of fiscal constraints, a decision commerce department backs. "We do not want to give subsidies," a commerce department official told ET.

Worried over a possible spike in prices, the inflation-scarred government had been delaying a decision on export of wheat despite bumper harvest and more-than-comfortable stocks. However, the empowered group of ministers on July 11 decided that the country could risk lifting the four-year-old export ban to make place for more stocks when fresh procurement begins in September. But the international prices have dropped since then, making exports unviable at current prices.

"If we had exported some wheat in the first quarter last year, we would have made considerable profits. But at the current domestic and international prices, our wheat will not find any buyers overseas," the official said.

Russia reportedly sold 1,80,000 tonne of wheat to Egypt recently at $243.50-$244.50 a tonne while the EU and the US had offered at around $285 a tonne. In contrast, India's wheat is being sold domestically at about $350 a tonne.

"Although finance minister Pranab Mukherjee has assured traders that a decision on wheat exports will be taken soon, it is unlikely that it would be favourable," the official said.

The stand taken by the ministry of food, consumer affairs and public distribution against allowing wheat exports is also not going to help the exporters' cause. Minister of State for Agriculture, Consumer Affairs, Food & Public Distribution KV Thomas said that his ministry wanted that the excess foodgrain should be distributed in the country first.

"The government is distributing 5 million tonne wheat to below poverty line (BPL) families, 5 mt to above poverty line (APL) families and another 5mt to the 150 poorest districts from the stocks," Thomas said recently.

What cannot be, however, ignored, is the fact that the FCI's coffers are overflowing and a lot of stock is lying in sheds in the open. Things are going to get worse when the kharif harvest starts arriving later this year.

One good option is to channelise stocks to African countries on compassionate grounds, said Sachin Chaturvedi, fellow, RIS. "African countries including Mali and Somalia have requested us for wheat. In fact, the FAO had suggested in April this year that some of our wheat should be diverted to Africa to help us manage our stock better," he said.

Since Prime Minister Manmohan Singh, during his recent Africa visit, had promised to support food initiative in African countries, this could be India's opportunity to do so. It would, at least, be better than to allow it to rot, Chaturvedi said.

Source : economictimes.indiatimes.com