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Indian foodgrain production slips while procurement surges

By RJ Whitehead , 24-Jan-2013

Citing leaked figures, Bloomberg has reported that India will announce a drop in its foodgrain harvest of nearly 4% when it is revealed next month.

Farmers may reap around 250m tonnes of grain over the year ending June 30, but this will be down by 3.8% from last year’s 260m tonnes, said two government officials quoted by the business news service. The wheat crop should stand at 90m tonnes—down 3m tonnes from last year’s record production.

The reductions can be explained by below-average monsoons, although a spokesman for the government declined to comment on the leaked figures.

Production of food grains, including rice, corn and lentils, sown during the monsoon and harvested from October may drop 9.8% to 117.18m tonnes, according to the ministry’s estimate. Harvesting of wheat, the biggest winter-sown crop, usually begins in March.

Demand still to be met

However, even a smaller food-grain harvest should be enough to meet domestic demand after two consecutive years of rising output. State stores of rice and wheat were 66.7m tonnes as of January 1, compared with the government’s buffer requirement of 25m tonnes, according to the Food Corporation of India (FCI).

Earlier this week, a parliamentary panel on food indicated that the government might revise the prices of foodgrains distributed through its food security scheme as part of a move to contain the widening fiscal deficit.

Currently, the targeted public distribution system provides subsidised grains to over 65m families below the poverty line, and 110m families that are marginally above it.

"The government may revise the prices in five years, depending on grain production, procurement and stocks," said Vilas Muttemwar, head of the parliamentary panel.

Procurements on the increase

Meanwhile, the FCI has announced that it aims to procure over 42m tonnes of wheat over the 2012-13 marketing season—a move that is likely to worsen India’s storage problem and blow an even bigger hole in the food subsidy bill.

Procurement will begin across Punjab and Harayana in April and continue until the end of June. Farmers are assured a minimum support price of Rs1,350 a quintal. 

The FCI, which has a cash credit limit of Rs 55,000 crore to procure wheat and rice backed by a consortium of 62 banks with the government as a guarantor, will pay procurement agencies once it starts handling the stock. 

A huge procurement is expected from Punjab, Madhya Pradesh and Rajasthan. This will push up the country's food grain stock to a record of 90-95m tonnes, including 40-42m tonnes of wheat and carryover stock of 39m tonnes of rice and 23m tonnes of wheat. In the previous year, the government had a grain stock of 82m tonnes on June 1.

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