The Hindu : New Delhi News : Pawar defends decision to import wheat at Rs. 16 a kg

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Friday, Sep 14, 2007
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New Delhi

Pawar defends decision to import wheat at Rs. 16 a kg

Gargi Parsai

“A ‘conscious decision’ to augment public stocks and keep prices under check”

‘Decision taken to insulate the weaker sections of the society from inflation’
‘Support price of wheat this year was higher than the prevailing international price at the time’

NEW DELHI: Under pressure for importing 7.95 lakh tonnes of wheat at a high price of about Rs 16 a kg against the support price of Rs 8.50 given to domestic farmers, Union Food and Agriculture Minister Sharad Pawar said that the decision had been discussed at “appropriate levels” in the government and was a “conscious decision” to augment public stocks and keep prices under check.

“The Empowered Group of Ministers took the decision which was influenced by the downward revision of the global wheat production, apprehensions about some major wheat producing countries placing restrictions on wheat exports and the Chicago Board of Trade (CboT) futures showing an upward trend of wheat prices for December 2007 and March 2008.”

Mr Pawar has said this in a letter he wrote on Tuesday to members of Parliament defending the decision which, he claimed, was to insulate the weaker sections of society from the pressure of food prices. He said that the support price of Rs 850 a quintal to farmers for their rabi wheat crop this year was higher than the prevailing international price (Rs 744 a quintal warehouse price) at the time. “Purchasing wheat at a higher price in the domestic market ‘now’ will not benefit farmers since most of the farmers have already sold their surplus wheat and the entire benefit would get cornered by traders. Domestic procurement at this stage would definitely affect consumers since prices could go up on account of government purchase in the domestic market.”

In his eight-page letter, Mr Pawar claimed that domestic prices had been kept under control despite the flaring up of prices in the international market. He, however, did emphasise that despite raising the support price of foodgrains for farmers, the issue price under the Public Distribution System had not been raised since 2002 resulting in an increase in the food subsidy from Rs. 23,000 crore to Rs. 30,000 crore in the last two years.

On the reversal of a decision in May to buy three lakh tonnes imported wheat, against an announcement of 10 lakh tonnes at $263 a tonne (Rs. 10.78 a kg) — while domestic procurement was on — Mr. Pawar said, the State Trading Corporation (STC) had proposed this as there was a possibility of lowering of global prices in August.

This was because fresh crop was due for harvest in major wheat exporting countries of Russia, France, Germany, Kazakistan, Ukraine, etc. Besides, the Australian crop was to be harvested during November/December and was likely to have a “softening impact” on global prices.

The Integrated Finance Division (IFD) of the Department of Food and Public Distribution examined the proposal and advised against import of wheat at the tendered $ 263 a tonne saying that “a very high benchmark price would be established for future wheat imports” and the bid was cancelled. “Had the government gone ahead with imports then it would have been accused of ignoring sound advice,” Mr Pawar said.

In the meantime, the Ministry extended the date of procurement of domestic wheat by 15 days till June 15 and procured 9.38 lakh tonnes making a saving of Rs 214.14 crore, he said.

After the end of the procurement season, STC, after floating a tender, recommended purchase of 5.11 lakh tonnes of wheat at an average weighted price of $ 325.59 a tonne (Rs 1,33,449) In view of the downward revision of global wheat production, a question mark on the Australian crop, the rising trend of wheat prices in the futures market and fear of restrictions on wheat export by some countries, it was decided that STC may float another tender. On the basis of this tender, STC offered to import and supply 7.95 lakh tonnes at a weighted average price of $ 389.45 a tonne (Rs. 15,967) delivered at Indian ports.

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