Tuesday, April 1, 2008

Indians paying less for food

NEW DELHI: If life is about playing a poor hand well, India has come out trumps. From proteins and carbs to fats, dairy and spices, Indian consumers are still paying less for food than people in many other countries. All-out efforts by millions of farmers, coupled with some smart fencing of borders by the government, have ensured that the aam aadmi is still partially protected from frontal assault by global food price hikes.

Take basic food items. In India, bread and biscuit manufacturers are buying wheat for Rs 11/kg. In Ukraine, it is selling for 15/kg. Ukraine is among India’s closest and cheapest sources for imported wheat. A better-than-expected harvest, along with a ban on wheat exports and duty-free imports helped keep prices flat. Since the gap between demand-supply is only 3%, subsidised imports for PDS were sufficient to prevent hoarding.

In rice, India always had a structural surplus with an annual output of 92 mt. Though prices have risen 20% in one year, Indian rice is still available for Rs 15/kg. In Thailand, the world’s top exporter, it is selling for Rs 28/kg. By curbing exports and opening imports, the government is keen to step up the psychological pressure on rice prices till the new harvest in November.
India’s meat and poultry industry can still buy corn for animal feed at Rs 7.50/kg. In Thailand, the world’s top exporter of poultry products, it is selling for Rs 11/kg. Comparatively lower feed prices have enabled Indian meat, egg and dairy products to remain cheaper than the world market.

Sugar is available in India for Rs 15/kg. Prices in Brazil are around Rs 17/kg. In pulses, Indian mills are buying chickpeas for Rs 27/kg. On the other hand, in the world’s top producer and exporter Australia, the average price is Rs 33/kg. Similarly, refined soya oil at Indore is available for Rs 59/kg. However, imported crude soya oil from South America and refined locally would cost Rs 69/kg at current prices.

“While India’s prices are usually aligned to world markets due to import dependence, domestic prices are lower because traders have bought in advance and it is profitable for them to sell even at replacement cost,’’ said a market watcher.

The big worry is that with all its moves virtually exhausted, India may no longer have a trick or two hidden up its sleeves. “It’s over as far as we are concerned. There are no more options for intervention left,’’ said a senior food ministry official here.

Fortunately, India’s own harvest may again come to the rescue. The wheat crop is looking good, with an upside estimated at 76 mt. That should take some pressure off the government while supplying to ration shops.

There is plenty of rice available, now that the export outlet has been shut. By dismantling the buffer stock and curbs on exports, sugar prices can be easily controlled. Though keeping vegetable oil prices in check is relatively tougher, the market is an efficient one and immediately passes on duty cut benefits to the consumer. Pulses are trickier to control because availability is poor in the world market except from a couple of origins. That is why India is forced to depend largely on its own output, which has remained stagnant for more than a decade now.

“There is high substitutability among vegetable oils and pulses, with consumers simply shifting to the cheapest option. Basically, in pulses and oilseeds consumers are paying for years of sustained government neglect. Hopefully, the new price signals would jolt both the states and the Centre into action,’’ said a trader.