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Luring private sector for foodgrain storage

Finance Ministry is toying with the idea of providing fiscal incentives to private sector for expanding the foodgrains storage capacity in the states.

india Updated: Feb 11, 2006 20:50 IST

Close on the heels of the decision to import half-a-million tonnes of wheat, the UPA government is readying a plan to ensure judicious management of foodgrains and price stabilisation.

Sources divulged that a three-pronged strategy might be announced by Finance Minister P Chidambaram in his budget later this month to procure, manage and distribute the foodgrains.

Finance Ministry is toying with the idea of providing fiscal incentives to private sector for expanding the foodgrains storage capacity in the states.

Secondly, the UPA government may also prevail upon the states to take over the burden of procurement and distribution of foodgrains, thereby reviving the old proposal with some major amendments.

Thirdly, the government will direct the Food Corporation of India (FCI) to manage the central food stocks till the states undertake this operation. However, FCI will be mandated to continue maintaining the food stocks necessary for any contingency or natural calamity in a particular state.

Sources said that the Finance Minister might offer an olive branch to states for foodgrains procurement by agreeing to fund the entire operation and involve private companies in creating capacities to hold the stocks.

In the renewed plan, the Centre proposes to underwrite the entire risk of procurement of food grains like wheat and rice.

The PMO is keen to get this proposal through in the next budget. Sources said that President Dr APJ Abdul Kalam would provide a firm hint on this count in his address to members of both the houses of Parliament at the budget session beginning later this month.

Parallel foodgrains procurement strategy involving states and corporates was being looked into so that dependence on imports was minimised, PMO sources said.

On funding the procurement by states, Finance Ministry officials said, "Anyway Centre has to bear the cost of importing wheat worth 5,00,000 tonnes that is likely to cost Rs 38,000 crore."

Sources said that fiscal incentives to create additional storage capacities might be in the form of tax breaks for such projects. Thinking in the Finance, Agriculture and Food Ministries is that an attractive proposition has to be made to involve corporates in storage capacity expansion that has failed to take off till now.

Prime Minister Manmohan Singh gave a directive on February 2 to import the wheat, setting aside the Agriculture Minister Sharad Pawar's opposition to the move.

The wheat imports decision was taken at the instance of Prime Minister's economic advisory council chairman Dr C Rangarajan, who cited the spiralling prices of wheat in several states.

Southern states like Andhra Pradesh, Karnataka, Tamil Nadu and Kerala are facing shortage of wheat. Australia-based monopolised wheat exporter AWB Ltd has projected that India is likely to import one million tonnes of wheat due to shortage. While STC would import wheat at nil duty, private importers will attract 70 per cent duty on wheat imports.

First Published: Feb 11, 2006 20:38 IST