Food ministry says it is not averse to export of wheat or rice

NEW DELHI: Taking a U-turn, Food Minister K V Thomas today said he was not opposed to allowing exports of foodgrains and a decision on the issue will be taken by a panel of ministers at the earliest.

The government in early 2007 had banned shipment of wheat and later in April, 2008 restricted exports of non- basmati rice.

“We are not averse to export of foodgrains. I do not mind export of some quantity of wheat and rice as there is a bumper production. There are suggestions from state governments and other ministries for exports of 2 million tonnes of wheat and 1 million tonnes of rice,” Thomas told reporters, here.

An Empowered Group of Ministers (EGoM) on food, headed by Finance Minster Pranab Mukherjee , will take a decision at on allowing export of wheat and rice at the earliest, he said.

The minister had said several times that exports could not take place in view of the huge demand of foodgrains under the proposed National Food Security Act.

The government is now facing the problem of plenty with granaries overflowing in its godowns. As on June 1, the Food Corporation of India (FCI) has an all-time-high stock of 65.4 million tonnes of wheat and rice.

Sources said that the Food Ministry, which fears shortage of space in view of bumper procurement, has already send a proposal on this issue to the Commerce Ministry.

Asked whether the government will permit export of grains stored in FCI or from the private trade, Thomas said, “Details are being worked out. The final call will be taken by the EGoM”.

He, however, said that the export should not lead rise in domestic retail price and benefit should reach to farmers.

Wheat procurement by the FCI has touched the record 28 million tonnes in the ongoing 2011-12 rabi marketing season (April-June).

India panel to decide on rice, wheat exports

NEW DELHI: India’s food ministry is not against grains exports and a panel of ministers will decide on rice and wheat exports, the food minister said on Wednesday, without specifying any time frame.

“Food ministry is not negative to exports, but we will have to look at the demand in view of the Food Security Bill. We will place the issue before EGoM (Empowered Group of Ministers),” K.V. Thomas told reporters.

India could decide soon to allow exports of a million tonnes each of wheat and common rice as government stocks hit a record 65.6 million tonnes, well above targets, two government sources said on Tuesday.

India, one of the world’s biggest producers and consumers of wheat and rice, has kept a tight control over grain exports since 2007, allowing only overseas sales of aromatic basmati rice, to ensure it can provide cheap food grains to the poor.

India’s farm minister, Sharad Pawar, has called for grain exports with stocks overflowing after three years of bumper harvests and the onset of the monsoon has raised concerns stocks outside could be damaged, adding to pressure for sales.

But concerns over food inflation, which is currently around 9 percent, and the need for supplies to fill commitments for more cheap food in a proposed Food Security Bill have stayed the government’s hand so far.

Centre likely to open up foodgrain exports

NEW DELHI: At long last, the Centre is likely to open up foodgrain exports, albeit in a capped manner. Food minister K V Thomas said here today that his ministry was “not averse” to opening up grain exports “at the earliest.”

“We’re not negative to it. We’re reviewing grain needed for servicing the right to food bill and the EGoM will take a decision soon. The core ministry has suggested in a note to Commerce that exports initially be opened up urgently “in order to advantage farmers,” based on the production estimates given by the agriculture ministry. “Whenever the EGoM meets next, this will figure on its agenda,” the minsiter said. Indications are that the farm and food ministries are keen that once exports are opened up, farmers will begin to get a good price in the open market for their produce this kharif marketing season, thereby reducing the procurement and storage pressure on the Centre which currently runs into several hundred crores in holding costs and balloons the food subsidy bill. Having had to face stringent criticism over food grain prices plummeting below declared MSP in the just gone rabi marketing season, the government wants all the more certain that farmers, in the thick of the sowing season for the summer season, will be benefitted.

Grain output targets have exceeded estimates marginally but the farm ministry had suggested that 2mt of wheat and one million tonne of rice be exported. The food ministry itself, it is indicated, is keen on one million tonne each of rice and wheat in exports. “We have to be somewhat cautious since the IMD has forecast the possibility of Below Normal monsoons,” minister Thomas said. However, there is no decision yet on the quantity and on whether exports will be from the Central pool or by the private sector. That decision is likely ot be also taken by the EGoM.

“While the foodgrain stocks with the Centre are invaluable in ensuring food security, it is simultaneously a challenge to ensure that storage and distribution are efficient and economic costs kept down,” minister Salman Khurshid stressed at a press briefing on the contentious grain storage subject here. The Centre’s food subsidy bill projections for this fiscal is an estimated Rs 83,000 crore to Rs one lakh crore.

Why the change in stance on exports, especially since the government has put off the sensitive decision for months despite a Central grain stock exceeding 65mt, citing food law needs assessment? “We’re now fairly clear on how much we will need for the food law, an average 62-65mt.,” minister Thomas said. More importantly, there are clear indications that the food law, even if approved, may be implemented for less than six months, entailing far less than annual estimate of offtake by states. That has opened up possibilities for export further.

Currently, Central procurement is around 29% of the total grain production. Once the food law is implemented, that is likely to go up close to 40%. But concerns over food inflation, now around 9%, besides the proposed food have stayed the government’s hand so far.

Significantly, the parent ministry is now preparing a draft report to submit to the relevant minister panel. The report, to be finalised within the week, will reconcile the draft food law recommndations of the NAC__recetnly cleared_ and the suggestions of the EAC. Interestingly, the draft food law has designated the mother as the head of the family primarily in order to ascertain that neither grain nor cash, should it subsitute grain in any part, is siphoned off for other uses apart from meeting the bare necessities of the family unit.

On the issue of inflationary impact of the food law on open market grain prices, Mr Thomas said “Some apprehensions have been expressed by experts and government is cognizant of the possibility. The food law is meant to guarantee essentials to the neediest in the country during times of high food prices and inflation and we as government and Congress party are committed to fulfill our poll promise on this. So we have worked out several antidote measures should inflationary pressures start showing up significantly in the open market.”

India, one of the world’s biggest producers and consumers of wheat and rice, has kept a tight control over grain exports since 2007, allowing only overseas sales of aromatic basmati rice, to ensure it can provide cheap food grains to the poor. More recently, the Centre allowed a capped quantity of select rice varieties such as Ponni and Rose Matta besides Sona Masoori for exports but the quota has yet to be used up. According to ministry sources, that is because inferior varieties are being exported, leaving better varieties for the home marekt where grain prices are firm.

Farm minister Sharad Pawar has been repeatedly calling for opening up farm produce exports including food grains and sugar, especially since stocks are overflowing after three years of bumper harvests and the onset of the monsoon has raised concerns stocks outside could be damaged, adding to pressure for sales.

Criminal Waste of Food Grain

Punjab has had a bumper wheat crop this year, the yield touching 135 lakh metric tons. But the storage agencies in the state have only 30 Lakh MT of indoor space, that is already occupied by the stocks of previous batches. Wheat of the older batches is dotting several places in Punjab and Haryana where stocks have rotted long ago, and foul smell now emanates from it making life miserable for the people living in the nearby area. With the arrival of the monsoon, this rot is only going to get bigger.

Times Now visited one such outdoor storage facility where over one lakh sixty thousand quintals of wheat has been rotting in the open since 2007.

Workers at the storage facility say that the wheat was stored here immediately after it was procured in 2007 and could have been saved if they had been provided plastic sheets and holding nets to cover the wheat stocks to save it from scorching sun and rain. But the department didn’t provide these things after the first year.

At the scene one of the workers said, “The entire crop has rotten. Nothing is left. This crop has been here since 2008. The owners got this crop. They didn’t give us any cover or anything. The inspector tried a lot but even he can’t do anything. They don’t provide us any expenditure labour costs.”

Thousands of tons of precious grain has been rendered unfit for consumption, not just be humans but also by animals. This stock of rotten wheat will now be auctioned to be used in liquor making.

Seeds of Change

Seed is the only part of the agricultural chain that is growing at 20% a year and is insulated from both government subsidies and weather vagaries. And, in the clamour for higher yields and greater farmer acceptance, seed companies are hitting a sweet spot in innovation, reports Nidhi Nath Srinivas 

Economic Times (New Delhi), 28th June, 2011.

At his plush Banjara Hills office in Hyderabad, India’s seed-industry capital, M Prabhakar Rao, chairman and managing director of Nuziveedu Seeds, is drawing up plans for an IPO next year. Whatever the timing, he knows it will be a cinch. “It’s a recession-proof business,” he says with the quiet confidence of a CEO who found private equity firm Blackstone on his doorstep with Rs 200 crore in 2008. In nearby Jubilee Hills, Dr Paresh Verma, director of research at Shriram Bioseed, has signed off his company’s 2010-11 numbers with a 44% jump in turnover, to Rs 292 crore. His target this year is 42%. “We will see similar growth for the next four years,” he says. A 20% growth rate and a 50% gross margin have become routine because of the opportunity, says M Harish Reddy, the dapper managing director of Ganga Kaveri Seeds, who chose this over his family’s other business of bottling Budweiser beer. There’s an unmistakable buzz in and around the $1.5 billion Indian seed industry. “It has the potential to grow to $2.5 billion in the next five years,” says Adityendra Kumar, analyst at Rabobank India. The last two-and-a-half years have seen six equity deals worth $153 million being signed. “For us, it’s a play for the next 20 years, not the usual five,” adds Manish Jain, whose private equity fund Axis Holdings has invested $5 million in Kaveri Seeds and is preparing to sew up two more deals. Multinationals are hunting for Indian players with research skills in cash crops like cotton, corn and vegetables. As are cash-rich homegrown companies like the Rs 900 crore Nuziveedu, India’s largest seed company. Also, fertiliser and agro-chemical companies, like Rallis India of the Tata Group, are diversifying here. “Acquirers have paid high premiums,” says Kumar. Investors and companies are buying the macro story: the growing demand to feed a billion mouths, millions of whom transit to a superior diet every year; rising food prices; the world’s second-largest arable area; and the $150 billion Indian agriculture sector. But that’s not all they are buying into. If so, any agricultural business would pass muster. But most in India don’t because they are either out of bounds, or are plagued by government subsidies or weather vagaries (See graphic: The One Attractive Link…). By comparison, seeds is a free market for all practical purposes; it is breaking new ground in adoption and innovation; and, no matter what the weather, a farmer will sow.


A pivotal change is in the offing in how farmers sow. About 70% of the seeds sown in India are those saved from the previous year. Compared to new seeds, they yield less and are more disease-prone. The government has set a seed replacement rate—percentage of new seeds in a year—target of 40%. “If that happens, the industry will grow three times,” says Dr Verma. While the government is using policy to increase consumption of new seeds, companies are improving product quality. The industry is, today, at a point where cuttingedge technology meets high finance and industrial farming. The main challenge is to increase yields. Agricultural land is finite. So, to feed a population that is growing and eating more, that means drawing more output from the same land. That means losing less to the three giant killers: heat, thirst and pests. That means withstanding floods. That means lowering farming costs. A tiny seed, which has greater potential for innovation than anything else in the agri chain, can deliver all these. “Seed is the agent for change,” says Dr Gyanendra Shukla, director at Mahyco Monsanto Biotech India. “From farmers and industry to scientists and government, everybody understands that change is faster and cheaper by leveraging seeds.”


Broadly speaking, there are two types of seeds. The first are varietals, which pollinate by themselves; they can be reused, but with diminishing returns. The second are hybrids, which are developed through controlled pollination and cannot be reused. Barring wheat and soybean, other crops have both types of seeds. In 2010-11, hybrids accounted for Rs 5,000 crore of the industry’s Rs 8,000 crore turnover. “Farmers have understood that varietals appears cheap, but are more expensive in the long run,” says Reddy of Ganga Kaveri Seeds. “Seeds become tired, and lose yield potential and quality from onegeneration to the next.” Adds Amitabh Jaipuria, managing director of Monsanto India: “Conversion of area from varieties to hybrids will be the next big thing. As we saw in cotton, the availability of technologycan lead to faster adoption.” Monsanto transformed the Indian cotton market with Bt cotton, a hybrid introduced in 2002-03. Between that year and 2010-11, when 90% of cotton farms had Bt seeds, yields increased from 302 kg a hectare to 503 kg a hectare. And production from 13.6 million bales to 32.5 million bales, turning India from cotton importer to the world’s second-largest producer and exporter. Today, cotton accounts for half the hybrid seeds sold in India. Seed companies are looking to replicate that story in more crops. For them, hybrids promise growth and value, which varietals don’t. “Seed accounts for 5-15% of the cost of production,” says Jaipuria. “A farmer is willing to pay for value, performance and consistent quality. If you deliver this, you can recover value.” At present, hybrids are available for cotton, corn, pearl millet, sorghum, sunflower and vegetables. Greater adoption of hybrids means more seeds sold, which will mostly benefit the private sector. There are two central government companies and 13 state seed corporations. But their efforts are inadequate, says Ramesh Chand, director at the National Centre for Agricultural Economics and Policy Research. “Up to labs, government is good. But state seed corporations have become defunct.” Companies are reinvesting profits in research, expansion and asset creation, in that order. “R&D is the only differentiator to increase value for a farmer,” says Reddy. “With stronger IPR (intellectual property rights), companies are competing to show farmers a 15-20% increase in yields.”


Corn hybrids are a Rs 700 crore market, with Rs 70 crore being invested in R&D by Indian companies alone; investment in rice hybrids is a steady Rs 15-20 crore a year, says Dr Verma. The DuPont Knowledge Centre at the Genome Valley near Hyderabad has grown to 400 scientists in two-and-a-half years. “We were attracted by the quality of people available in India,” says director Homi Bhedwar. Companies need a large bank of germ plasm—the building block of a seed that houses traits—and capital. “It (germ plasm) is scarce, expensive and must be refined properly to meet breeding objectives,” says KV Subbarao, country manager of Pioneer Hi-Bred India, a subsidiary of DuPont India. Biotechnology is taking hybrids to another level, by tinkering with genes to alter traits of seeds. But launching a commercially viable hybrid is a slog, with a high risk of failure, which discourages smaller players. “The discovery of a new trait can take 2-10 years. From idea to dealer, it takes another 10 years, if all goes well,” says Subbarao. “It can cost up to $120 million in the US to develop a transgenic product with a good chance of becoming an industrial success.” Farm biotech is the fastest-growing segment of India’s biotechnology industry, says Dr KK Narayanan, co-founder and managing director of Metahelix, which developed an alternative technology for Bt cotton. Biotechnology brought with it a new business model. Monsanto India, through its joint venture Mahyco Monsanto, has licensed its basic Bt cotton technology, based on genetic modification, to 35 companies. Such tie-ups allow Indian companies to leapfrog several years of research, and enter the market cheaply and quickly.


Companies are making variants to be relevant in all eight agro-climatic zones of India. They are setting up shop in Africa and South-east Asia, where the climate is similar to India. They are venturing into new crops with untapped market potential. Monsanto, for instance, is investing in vegetable seeds, a Rs 800 crore market. It has to start from scratch because vegetables that are popular abroad, like broccoli and lettuce, don’t fly in India yet. Challenges will increase. The pool of scientists and researchers is limited. And expanding marketing and distribution calls for more spending. “Seed is a show-and-tell business,” says Vidya Sagar Parchuri, CMD of the Rs 650 crore Vibha Seeds. “Each year, we hold 10,000 demonstrations for 100,000 farmers. Village-night meetings, posters, hoardings and advertising are extra.” All this eats into the 50% gross margin that good companies typically earn. Technology has increased risk by shortening the product shelf life from 10-12 years to 7-8 years. “After introducing a new seed, it takes two years to scale it up. It sells for four years and then declines because new rivals enter the market,” says Subbarao, making a case for a strong pipeline of hybrids. As R&D costs increase, companies are expected to seek alliances with government research institutes and state agricultural universities, which can develop technology but need help to commercialise it. “The Green Revolution was driven by the public sector, the Bt cotton revolution by the private sector,” says Shukla. “The next push will come from public-private partnerships.” Companies say if policies encourage competition and innovation, promote a science-based regulatory regime and protect intellectual rights, investment and growth will continue. It’s why they decry the proposed Seed Bill 2008, which penalises companies for crop failure. “It can’t prevent the problem of counterfeit seeds,” says Rao of Nuziveedu. It’s why instead of subsidised seeds—which some states, including UP, Rajasthan, Gujarat and Bihar, offer—they suggest a cash subsidy. “Government subsidy takes away merit,” says Jaipuria. Adds Rao: “Give a cash subsidy against a bill to give farmer the freedom to buy.” Those are small issues, but the big story has been planted.


Grain Train

Ravish Tiwari Posted online: Tue Jun 28 2011, 01:17 hrs

In 2007-08, staring at a global food crisis, a nervous government banned export of wheat and non-basmati rice without bothering to create the space for the stocks the country would hold back.Today, with the granaries overflowing, the government is struggling rid itself of stocks that it just cannot manage.

Thanks to the export ban and a bumper wheat harvest, the government is staring at 65.5 million tonnes of foodgrain stocks, already more than the 63.36 million tonnes it can accommodate across the country, and twice as much as the buffer norm of 32 million tonnes for June.

Damage control

Last week, an empowered group of ministers (EGoM) headed by Pranab Mukherjee decided to release an additional 5 million tonnes of foodgrains into the public distribution system. The move, which came the day the government announced food inflation at a high at 9.13 per cent, had nothing to do with controlling this inflation, which is a result of the rising prices of dairy products and non-vegetarian items rather than cereal availability.

The excess wheat being released has been subsidised at Rs 6.10 a kg, the rice at Rs 8.45 a kg. This is because pricing closer to existing rates had not worked earlier. Since May 2010, of the 10.5 million tonnes the government tried to release, only 40 per has been cent picked up.

Yet the government may only be buying time with a fresh paddy crop due for procurement in three months’ time.

Ground zero

Outside the mandis sn Rohtak, Jind, Narwana, Kaithal and Kurukshetra in Haryana’s foodgrain belt, wheat lies stacked in the open on wooden plinths and beneath plastic covers. In Punjab, 1.9 million tonnes are being stored unscientifically, without even the necessary plastic cover, Food Ministry sources say.

Nationwide, the wheat lying in the open has doubled in three years. It is fresh in most places, with old stocks yet to be removed from inside. The Food Corporation of India (FCI) godown in Narwana, Haryana, has about 20,000 tonnes wheat outside, with 80,000 tonnes kharif rice yet to be transported out of the covered facility.

Some godowns have removed old stocks but the fresh wheat alone has caused them to overflow. At one place rented by the state, even last year’s wheat remains in the open. Wherever some has been disposed of, fresh wheat is being stacked. Both Haryana and Punjab had to pressure the Centre to evacuate last year’s stocks ahead of this year’s harvest.

“It is a grain emergency. While some people are happy that the country has got over 65 million tonnes, I am not sure whether it is a reason for celebration or serious concern,” says Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices (CACP).

“The government’s buffer norms require only about 32 million tonnes. This additional 33 million tonnes cost the government about Rs 50,000 crore,” says Gulati, stressing the need to export these grains.


The covered storage capacity at FCI-owned facilities has remained stagnant at 12.9 million tonnes for over five years. State agencies have separate facilities but have been reluctant to enhance their capacities. The FCI also rents space or has created covered-and-plinth facilities in open spaces of FCI complexes. The capacity of rented space has increased from 9.34 million tonnes in April 2007 to about 15.5 million tonnes in April 2011.

The government has struggled with efforts to attract private investment. A five-year-guarantee hiring scheme, in 2008, put off possible investors. The guarantee was extended to seven years and then 10, but this took three years and stocks by then had more than doubled, from under 20 million tonnes in April 2008 to over 44 million tonnes this April.

A five-year or seven-year guarantee would not have returned the investment, says Satnam Singh, a commission agent in Rohtak Mandi. Singh, who has bagged a contract to construct facilities for 10,000 tonnes, hopes the 10-year scheme will allow him to break even in six to seven years.

The government plans to create space for 15 million tonnes under the revised scheme. But these facilities will not be ready before 2013. Till June, tenders were still under process for projects covering over 8 million tonnes, and facilities for hardly a million tonnes were under construction.

The government has delayed a decision on modern silos/storage facilities, the issues being identification of locations and costs. The EGoM decided on a pilot project of modern silos for at least 2 million tonnes, but that has remained on paper, despite the success of previous FCI experiments: at Kaithal (Haryana) and Moga (Punjab), the Adani group has been managing modern silos of capacity two lakh tonnes each since 2007.

On the field

Trade groups have been calling for an end to the export ban, while farmers in some states are struggling with low prices. In parts of Bihar and UP, these have slipped below the minimum support price because of the absence of a public procurement network and the reluctance of traders to stock up grains, Krishi Bhavan officials say.

“I visited Bihar last month and found that farmers were selling their produce in the range of Rs 975-1,100 a quintal. The modal price in Bihar was about Rs 1,040 against the MSP of Rs 1,170 a quintal. This is in contrast to Punjab and Haryana where the procurement network is deep and the government even pays state tax to the tune of 14.5 per cent to buy grain for the central pool,” Gulati says.

Even in Haryana, the fear is that farmers may struggle to get good prices for rice after the kharif season, with many premium non-basmati varieties not procured by the government, and because traders may not enter the market as exports stay banned.

Food Minister K V Thomas, who so far had been rejecting the possibility of foodgrain exports, now appears to be open to the idea of allowing limited exports.

“In the last EGoM meeting there was a suggestion to export certain quantities of grain. We are assessing that. I will hold a meeting next week to assess the situation,” Thomas told The Indian Express.