Poll bonanza: Taxpayers' money to reward traders!

NEW DELHI: The government is using taxpayers’ money to boost the bottomlines of a handful of private traders and MNCs by supplying them 2 million tonnes FCI wheat sweetened with a hefty export subsidy. But for exporters these profits are completely legit.
As world prices have moved up $50/t in the last nine months, they are now enjoying the double bonanza of cheap wheat from FCI godowns, and higher profits through new lucrative contracts from overseas, all without worrying about the law.
Current government policy itself allows exporters to substitute their initial contracts submitted to FCI with new contracts based on latest world prices. What gives these corporates an additional edge over other exporters is the fact that FCI has stopped booking fresh contracts for wheat exports. Consequently, this 20 lakh tonnes FCI wheat, out of which 5 lakh tonnes is yet to be shipped out, is virtually the only wheat that is moving out of India.
Ignoring its own policy to progressively reduce the burden of subsidy on every tonne of wheat, the government has not raised the issue price of export-quality wheat from August last.
Though a decision was taken to raise issue prices at a short notice, without giving the earlier 45-day notice to exporters, the high level committee on grain prices has not yet thought it fit to align FCI rates with spiralling world prices.
As a result, FCI has been unable to improve its net realisation from this 20 lakh tonnes even though world markets have finally turned favourable and FCI itself is under no pressure anymore to dispose off its stocks.

“Before August, the FCI would systematically increase issue prices every quarter even though exporters would have contracts based on previous rates. However, once only the last few contracts, held by not more than a dozen companies were left pending, there has been a sudden freeze on issue prices. As world prices are now rising sharply, the government’s sudden lethargy is raising eyebrows,’’ say industry watchers.
“More importantly, all exporters booked wheat from FCI with their eyes wide open. Everyone knew that prices could be raised at any time. Yet, the government is suddenly treating them with kid gloves and thereby ensuring that they make some extra money,’’ they added.
For exporters who have booked these 20 lakh tonnes, the delay in getting enough rail rakes to move out cargo has meant an unexpected windfall in profits. They are able to legitimately make a profit from the whole deal by buying cheap from FCI and selling higher. Most contracts submitted to FCI are accommodative and “non-existent� since the actual deals are done months later, when the wheat is finally delivered at port. Moreover, no business is done on contracts with uncertain delivery.
So while the prices quoted in the August contracts may justify the FCI subsidy, in reality the subsidy is unnecessary because the final export later is at a profit.
“Exporters who are being favoured would like it to appear that they are still doing honouring the old low-price contracts they submitted in August.
That way they can pressurise the government into continuing to provide them wheat at old August rates. The truth is that very few deals have been done at those old rates. All FCI wheat is being hawked at today’s new higher prices,’’ say industry sources.
As a result of government largesse, pending FCI wheat has become the most prized commodity in grains market today because it spells super profits for those with access to it. For other corporates, it is acting as a price band, which limits what India can demand in world markets.