Govt food security programme and private players can coexist: User-industry

However, price may increase after ordinance is fully implemented

Fears have been expressed about private trade being crowded out due to the massive food security obligations of the government but the industry itself does not think so.

A cross-section of user-industry said India would have sufficient grain to meet the requirements of both it  and the government, which is expected to move its gigantic machinery to meet obligations under the recently promulgated food security ordinance.

Industry, however, might face price pressures as the government would have to keep its wheat and rice purchase price over the market rate to acquire the required quantities. There are apprehensions of pilferage in the massive programme of the government.

Chairman of Cargill India Siraj Chaudhury told Business Standard: “Though I believe the theory that private trade would be crowded out of the Indian foodgrain market because of the food security ordinance is not entirely true, I also believe much of this would depend on the price that the government would pay every year to purchase wheat and rice. But, yes, there is a possibility that wheat prices would rise because of this.”  Cargill is one of the biggest private operators in the Indian foodgrain market.

Others too said they did not fear being crowded out due to the government's food security programme.

“No, I don’t think big multinational companies would have any problem in purchasing wheat and rice from India after the ordinance, as currently too, the government purchases the bulk of these two commodities,” said a senior official from another leading multinational agriculture trading company operating in India.  

The government is confident its procurement of wheat and rice won’t rise so much as to disturb market economics.

Food Minister K V  Thomas recently said: “The ordinance would require 62 million tonnes of grains a year and according to projections done by the agriculture ministry itself, production and procurement is expected to be 253.2 million tonnes and 82.8 million tonnes respectively by 2039-40. If private trade was not crowded out so far, I suppose it won’t do so now, when we need to procure less amount of grains.”

The only negative fallout of the ordinance is it would encourage people to divert more quantities of grain in the open market as the difference between the market price and public distribution system price of a commodity like wheat would increase from Rs 10-11 a kg to Rs 15-16, said Veena Sharma, joint secretary of the Roller Flour Millers Federation of India said.

Industries directly dependent on foodgrain for their raw materials - like biscuit and bread makers - are not unduly worried over increased government procurement on account of the Food Security law.  

“At the moment, we do not see any squeeze in our raw material supplies as big flour mill owners are well stocked,” said Mohan Das, secretary general of the    Indian Biscuit Manufactures Association. 60 percent of a one kilogram biscuit is wheat flour.

The President of the All India Bread manufactures Association, Ramesh Maggu said even if there was any shortage of a key raw material like wheat, it could be supplemented by the government through schemes like Open Market Sale Scheme and others.

Rice millers too do not think more procurement by the government would jeopardise their trade.

“We are very confident that grain surplus would continue for the next 10-15 years, but yes, the provisions of the Food Ordinance should be periodically reviewed to ensure the quality of grains being supplied and the delivery mechanism is constantly improved,” Vijay Sethia, former president of All India Rice Exporters Association said.