The drought will hit hardest three commodities that are in perennial short supply in India – sugar, pulses and edible oils, while their demand is likely to soar in the coming winter-onset festival season.
With well-stocked warehouses, India is capable of riding out any foodgrains shortfall with relative ease, experts say, but cooling the prices of these three commodities will prove to be tricky despite a slew of measures.
Prices of these items surged between 53 per cent and 89 per cent over the last year, since their production not just remained way below the demand level, but imports also suffered due to high international prices.
Government data showed while foodgrains production soared, sugar, edible oils and pulses output declined.
Sugarcane production fell to about 15 million tonne in 2008-09 from the previous year’s 26.3 million tonne. And the demand soared to about 23 million tonne.
The demand for pulses, about 17 million tonne, outstripped its production of 14.66 million tonne, down from 14.76 million tonne previous year.
“Hardening of international prices of pulses has affected crucial imports, which dropped from 2.95 million tonne in 2007-08 to 2.57 million tonne in 2008-09,” a senior agriculture ministry official said, requesting anonymity because he was not authorised to speak to the media.
India already imported 2.5 million tonne of pulses – half the volume available in international markets, the official said.
Edible oil prices firmed up too because India’s total production of nine oilseeds was estimated at 28.13 million tonne in 2008-09, 11 per cent lower than the target and about 5.5 per cent lower than the 2007-08 production figure.
The projected domestic demand for oilseeds now stands at a huge 47.43 million tonne against an estimated production of just 28.16 million tonne, a demand-supply mismatch of about 40 per cent.
“I think the government should free these items of all restrictions and controls for smooth imports and exports and to manage inflationary expectations,” Rajiv Kumar, chief executive officer of the Indian Council for Research on International Economic Relations (ICRIER) said.
To boost stocks, the Centre has extended its scheme to allow duty-free raw sugar imports until March 2010 and white sugar imports up to November 2009.
Other fiscal measures include zero import duty on wheat, pulses, edible oils (crude) and maize up to the estimated requirement of 5 lakh tonne a year.