The government has given up plans to build grain reserves abroad finding it difficult to do so in view of the high food prices internationally.
It had assigned four public sector undertaking companies to explore the possibility of building a 2-3 million tonne (mt) grain reserve to facilitate economical import during a domestic shortage and avoid extravagant imports.
A grain stock abroad would have provided a cushion against fluctuating global prices while providing assured supplies.
“The idea was not found to be feasible primarily because international grain prices have been ruling abnormally high. Moreover, the domestic procurement of wheat was at a record high this year and enough stocks are available. Even the situation of rice is largely comfortable,” said a government official.
The country has had a record wheat and rice production in 2007-08. The government has also decided to form a three million-tonne strategic stock in wheat and another two million-tonne stock in rice.
The prices of most food commodities in the domestic market are significantly lower as compared with global prices and there is no need for import.
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The Centre has been able to keep the consumers largely insulated from high prices through a series of fiscal measures such as ban on export of wheat and non-basmati rice, and allowing duty-free import.
In the last two years, the government had to import wheat at high prices as domestic procurement was not sufficient to meet the demand from public distribution system. While in 2006, it imported 5.5 mt at an average cost of $205 a tonne, the average price for the 1.3 mt wheat contracted in 2007 shot up drastically to $365 a tonne.
The entry of a large country like India in the world market supported a price rise and suppliers quoted inflated price in the import tenders. The high cost of import borne by the exchequer led to a criticism from different political parties.