Direct grain procurement to begin soon

With the Union Cabinet having approved new grain buffer stocking norms a fortnight ago, the Centre is set to clear the high-profile scheme allowing direct procurement of grain for export.

Commerce minister Kamal Nath said the scheme, held up on food security concerns of the food ministry, �will be examined very soon� after the peak procurement period of the Rabi crop season is over.

The landmark scheme — a significant change from the controlled grain procurement scenario that persisted several decades — envisages a Rs 900 per tonne “transport replenishment� to grain exporters who procure grain directly from the mandis, to keep prices competitive in the global market. Exporters, however, were happier with the original estimate of Rs 1,200 per tonne suggested and point to the Rs 6,000 crore-odd loss incurred by the Centre every year on grain diversion and leakage losses as proof of skewed priorities.

Essentially, it is a WTO-compatible subsidy. Minister Nath flinched at calling the reimbursement a “subsidy,� given its negative WTO connotations, but maintained the scheme would now be tackled “urgently,� in close consultation with the nodal food ministry on the quantum of exports possible through the scheme this year.

Significantly, the food ministry had in May 2004 also objected to the funding for the scheme being hived off the funds allocated to it for enabling grain exports from the Central Pool, firmly rejecting any suggestions that private exporters would be subsidised with those funds.

In the event, the commerce ministry is expected to arrange for the funds depending on what quantum could be exported after fulfilling all food security obligations. When first mooted by the commerce ministry, the scheme was meant for unlimited procurement without any reference to the buffer stocking norms.

Projections at the time were that available funding for subsidy (Rs 600 crore) would mean that around 6 million tonnes would be exported annually. Currently, around 4-5 lakh tonnes of grain are being procured directly by private traders, but a good portion of this is by flour millers than for exports

The Third Advance Estimates on Crop Production by the government had pegged wheat production this year at 75 million-odd tonnes, much higher than projected by the earlier estimates and higher than the final estimates on production of wheat for 2003-04.

Boosted by this, the Cabinet on March 30 approved revised buffer stocking norms for grain keeping food security concerns centrally in mind. The new norms upwardly hiked the stocking norms for both the quarter beginning April and the quarter beginning July 1.