The widening gap between the combined cost of procurement and holding wheat stocks, and the export prices are making the case stronger for larger exports.
Sources say India, with 94 million tonne (mt) of wheat output in 2011-12 and 38 mt of procurement by FCI, is poised to allow more exports in the coming months to realise better prices and help the corporation deal with the acute storage crunch.
FCI at present has a wheat stock of over 40 million tonne, which is far above the buffer stocks and strategic reserves norm of 14 million tonne.
Our procurement policy is open-ended. We lift excess grain against requirement, thereby incurring huge storage cost, a senior FCI official told FE. FCI has been incurring nearly R3,000 crore annually on storing huge wheat stock which eventually adds to the food subsidy bill of the government.
In addition, the corporation this year has given R1,285 per quintal to farmers for procuring a record 38 million tonne of wheat. FCI also incurs other costs such as transportation cost and taxes of R200 per quintal.
Holding on to excess stocks not only create scarcity in the market, but adds to the food subsidy burden on the government, Aloke Sinha, a former chairman and managing director of FCI, said. The food subsidy bill is set to cross R1 lakh core in 2012-13.
Meanwhile, the global wheat prices had been ruling at $369 a tonne (around R2,000 per quintal) which is expected to push up exports from India. In last one year, the worlds wheat prices have appreciated from $298 a tonne to $369 a tonne, an increase of close to 24%.
Indias wheat exports are expected to cross more than 5.5 million tonne in 2012-13. Data from Agricultural & Processed Food Products Export Development Authority (APEDA) say India has exported over 2.4 mt of wheat in the first half of the current financial year and the exports are set to rise further after the government had put wheat exports under OGL.