Govt invites bids to export wheat with FCI

After more than seven years, the government yesterday decided to export wheat from its central pool, with the State Trading Corporation (STC) inviting bids from overseas buyers.

The deadline for submission of bids is May 24, while wheat can be shipped within six months ending December 31, the tender document published on the STC website said.

"The STC plans to ship the grain from Kandla and Mundra in Gujarat, with a minimum vessel-load of 20,000 tonnes and 30,000 tonnes, respectively," the document said.

The last time the government had exported wheat from the Food Corporation of India’s reserves was in 2004-05, during the NDA regime.

The need to explore the opportunity to export wheat arose after grain stocks in state-run granaries bulged to 71 million tonnes against the available storage space of 66 mt. The stocks are 150 per cent more than the required quantity. On Thursday, food minister K V Thomas told reporters that India was looking to export wheat. Though a senior government official said the bids have been floated just to discover prices to see whether export is viable or not, experts believe the proposal might not be easy to operationalise as global wheat prices are quite low, while the government's cost of storing the wheat is much higher.

Almost all major exporters are sitting on huge inventories. Quality-wise too, Indian wheat is inferior compared to the major exporters'.

The big problem will be to arrange finances because the government’s economy cost of wheat (the cost incurred to procure and store grains) is expected to be Rs 18.22 per kg in 2012-2013, while the average global price of US wheat during January to March was Rs 15.06 per kg, assuming the current rupee exchange rate is 54 against the dollar.

In other words, to export every kilogram of wheat sold from state inventories, the government will have to arrange for a subsidy of Rs 3.16.

This differential could be a big deterrent for the government to go ahead with any proposal to export wheat from central pool.

“Also, there are political facto Rs involved as very few people will support the idea of subsidising exports rather than selling it at cheaper rate through the public distribution system,” a senior ministry official said.

For rice, though, there may be some solace as the economic cost as estimated by the government is Rs 24.19 per kg, while the average price of the benchmark five per cent broken Thailand rice in international markets during April to March is Rs 29.52 per kg. In April, it rose to Rs 29.59 per kg, assuming the current exchange rate is Rs 54 against a dollar.

It is even higher when compared to international price of 25 per cent broken Thailand rice, whose international price is somewhere near $570 per tonne.

In other words, by selling rice from the central pool, the government can make a profit of Rs 5 per kg.

However, in case of wheat, the problem is acute and could create a serious crisis unless corrective measures are taken immediately.

As planning commission member and well-known agriculture economist Abhijit Sen said, successive rise in Minimum Support Price (MSP) of wheat has killed its export potential.

Between 2007 and 2008, the msp of wheat has been increased by 72 per cent, while that of common grade paddy (de-husked rice) has been raised by almost 94 per cent. The biggest jump came in between 2011-2012 and 2012-2013, 15 per cent for wheat and 15.7 per cent for rice.

“Given our stocks we should have given less hike in MSP, it would have helped private purchases and also problems related to government storage would have been less,” Sen told Business Standard.