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Saturday, Jun 01, 2002

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Grains export price cut

Harish Damodaran
K.R. Srivats


THE Food Corporation of India (FCI) will continue to supply foodgrains for export purposes at near below poverty line (BPL) rates, with the Government rescinding its decision to charge exporters the prevailing issue prices under FCI's Open Market Sale Scheme (OMSS) for domestic roller flour mills.

The Ministry of Consumer Affairs, Food and Public Dsitribution (MCAFPD) has intimated FCI that its earlier instructions, dated May 15, to charge exporters the OMSS price for foodgrains lifted from the Central pool ``be held in abeyance until the matter is examined in consultation with the Ministry of Commerce''.

Accordingly, FCI has directed its regional offices to ``continue taking the actions as was done before issue of these instructions''.

Further, in cases where exporters have already paid the OMSS rates in consonance with the new (now shelved) `WTO-compatible' scheme, ``the same should immediately be refunded to them by issuing a cheque'', FCI has said in its communication issued on Thursday.

Prior to the May 15 order of the MCAFPD, FCI was directly delivering foodgrains to exporters at ports (i.e nearest railhead point) at rates only slightly above the BPL issue prices. While the export price for wheat (effective from May 11) was Rs 4,310 per tonne, the corresponding rates for raw rice and par-boiled rice were Rs 5,760 and Rs 6,115 per tonne, respectively.

The May 15 order sought to introduce a new mechanism for subsidising foodgrain exports compatible with the World Trade Organisation's (WTO) regulations. Under this, exporters were to pay `market-related' rates for the wheat and rice sourced from FCI, equivalent to the prevailing OMSS prices.

The exporters could, however, claim re-imbursement from FCI against the head of `post-delivery expenses and related expenses', in order to cover the difference between the higher OMMS rate and the earlier near-BPL export issue price.

Thus, for raw rice, the post-delivery expenses were fixed at Rs 3,740 per tonne for raw rice, while being Rs 3,385 per tonne for par-boiled rice.

Considering that the OMSS price for rice was Rs 9,500 per quintal, the net export price (post-reimbursement) worked out to Rs 5,760 per tonne for raw rice and Rs 6,115 per tonne — the same as the rates under the earlier `direct' subsidised grain delivery route.

However, at a meeting with the Minister for Consumer Affairs, Food and Public Distribution, Mr Shanta Kumar on Wednesday, exporters had raised questions on the operational viability of the new scheme, citing likely delays in obtaining re-imbursement of post-delivery expenses from FCI. Following this, it was decided to keep in abeyance the scheme and work out an alternative WTO-compatible mechanism to subside foodgrain exports.

Welcoming the decision, Mr Anil Agarwal, President of Cosmos International, a Delhi-based exporter, said the Government could consider allowing exporters to issue a separate cheque to FCI, covering the difference between the OMSS rate and the lower export price.

This cheque, which is in addition to the payment made at the prevailing subsidised export price, could be encashed by FCI only in the event of the exporter failing to honour his contract.

``Such a route is compatible to WTO requirements, while also allowing exporters to honour their contracts without having their monies blocked,'' Mr Agarwal added.

Since November 2000, when the decision to export surplus grains from the central pool was taken, exporters have lifted over 105 lakh tonnes (66.23 lt wheat and 38.91 lt rice), valued at around Rs 5,000 crore in foreign exchange, from FCI's godowns.

The Government has targeted export of 150 lt of foodgrains (10 lt wheat and five lt rice) from FCI's stocks during the current fiscal alone.

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