India Intelligence Report
 

   Australia Ships Remaining Wheat

 

 

  • AWB says that it has resolved quality issues with Government

  • Plans to deliver 400,000 tons of wheat

  • UN official calls for strategic thought to increase output

The Australian Wheat Board (AWB) announced that it has resolved quality issues with Indian authorities and will be exporting the remaining 400,000 tons of wheat of the 500,000 tons deal valued at USD 90 million.

AWB delivered 100,000 tons to the South Indian ports of Tuticorin and Chennai and were found to be far below the low quality levels of India which the company claims is merely technical. The Agriculture and Food Ministry then said that it will lower quality standards  even more to accommodate the wheat order even as a senior United Nations official cautioned New Delhi not to make “panic purchases.”

UN Development Program (UNDP) official Anuradha Rajeevan said from an overall exporter, India is on the verge of being an importer of wheat but said “The import of grain may be a legitimate short-term measure. But there is also need to increase domestic supplies.” She also said that “There is need for a different strategic perspective.”

In its latest Food Outlook report, the Food and Agriculture Organization said world wheat production was likely to decrease by 10 million tons this year and a strong demand will drive up trade in 2006-07 to 110 million tons.

At 70-72 million tons, Indian wheat output has remained more or less stagnant falling from its peak level of 76 million tons in 2000-01. Adding to this problem, the government has been procuring a falling proportion of the output. Between 2001-02 and 2005-06 there was a 10 percentage-point decline in procurement relative to the Indian wheat crop. As the supply crisis was brewing, the Government worsened the problem by selling 700,000 tons between February and April in open market operations, essentially sales to private trade. Procurement by the state’s Food Corporation of India also dropped by 38% as private traders offered better rates to farmers.

Rather than focusing on “strategic” issues on increasing output, officials from the Agriculture Ministry officials are focusing on manipulating price systems by introducing a dual price system from next year. Under the new differential price system, the government would fix minimum support price (MSP) based on cost of cultivation and would also offer a variable rate-linked to open market price behavior. It is not clear how the Government proposes to frame the parameters and what these parameters will be.