Saturday, September 27, 2014




Tejinder Narang
 A sadhu mediated on a stone for 50 years. God appeared and demanded that sadhu seek forgiveness of his sins. Sadhu claimed that he is free from all sins. Lord replied that 60 kg of his body weight was borne by stone for 50 years in recent past. If that liability is to be squared up, stone must sit on sadhu’s head for that much time.
Unless sadhu seeks forgiveness from stone and stone in turns grants clemency, Lord mentioned that He will have to turn him (sadhu) into stone and let stone become a sadhu for karmic settlement.
In case sadhu refuses to plead forgiveness or if stone is unforgiving, Nature compulsively intervenes. Thus sadhu must pass through devolutionary process into lower species/animal/bird/insects etc. till he degrades to stone. Simultaneously stone must evolve in ascending scale as human being into devout sadhu in an indeterminate time frame. Nature will then match time and space for reversal of karmic account. 
Yet there could be odd situations. If any one of the parties dies, revenge or hurt may persist. Forgiveness cannot be evoked. Also if one kills another being, clemency cannot be applied. Wages of cruelty are then settled with matching force or brutality.
Non-forgiveness means living through life cycles of painful struggle of evolution and devolution. When men question unpredictable unexplained occurrences in life, they forget that Nature settles all actions, including sanskaras (impressions) in vastness of time and space. Atonement through forgiveness is the compassionate discretion accorded to man by the Lord.
Also, Lord may facilitate forgiveness of sins committed voluntarily or involuntarily by repentance through His Sons or Saints. Bible says, “[Jesus] is the atoning sacrifice for our sins”. Finally a third party’s intermediation becomes imperative for unsettled matters.

Friday, September 26, 2014



An interim solution with WTO now a necessity.

Tejinder Narang

World prices of all agro-commodities including sugar and wheat are dropping sharply.  Indian exports of these two items are utterly unviable while massive funds of Indian banks and the Government are blocked in their inventories.  Government is considering continuation raw sugar subsidy for exports while no stimulus is being thought of for wheat export (from FCI) where Rs 50000 crores is required by Food Ministry for clearing pending food subsidy bills. As corn prices are tumbling too, which have direct relationship with wheat and sugar/ethanol prices, medium term recovery is improbable. Had India complied with WTO’s Bali agreement and applied peace clause up to 2017, such subvention could have been settled easily. An interim solution with WTO on sugar and wheat subsidy also needs to be explored.


The supply side of sugar from Brazil, Thailand and India is surging. International consultancies are pegging raw sugar between 13cents/lb (about $300/mt) to 17c/lb (about $400/mt) in 2014-15—a wildly fluctuating range of $100/mt. (In October 2012, raw sugar was 22c/lb ($506/mt). At 25.5 million ton (mts) of Indian anticipated output plus 8 mill tons of carry-in vs 24 mts usage, there is a surplus of 9.5 mts.  High  local cost of sugar production ($450-460/mt) are deterrent to emerging export opportunities. Essentiality of extension of Raw sugar subsidy of Rs 3300/mt or $54/mt notified in February 2014 with some readjustments in 2014-15 to neutralize impact of irrational SAP(State Advisory Prices) is justified. Readjustment could be in the form of calibrating it with international price. 

Notwithstanding that subsidy is WTO non-compliant,   the aptness of decision will be defended on the grounds that it helps demand expansion via exports and also because reduction in large inventories of mills will enable clearance of cane arrears of farmers.

Indian raw sugar export climbed to about 1.1 million tons (mts) in 2013-14 from low of 0.19mts tons in previous year- an increase of 480% after accounting for subsidy supported component of 0.7 mts . Prominent buyers are located in Iran, Bangladesh, Sudan, UAE, Sri-Lanka and other countries of Middle East and Africa.  In 2014-15, exports of raws are estimated at one million tons. The debatable issue is why white sugar is ignored for subsidization and this too can be considered on equal footing so that total export (raw+white) of 3-4 million tons can be attained. It may have some impact on domestic inflation—but this has to be matched with priority of clearing cane arrears till such time SAP is rationalized.


 Wheat export

Now replace raw sugar by wheat; higher SAP of cane by MSP of wheat; private mills by FCI; large sugar inventory by wheat stocks of FCI; farmer’s arrears with Government funds.  Price wise world wheat has also plummeted by $ 80/mt since last year--- down by 27%. The concerns between sugar and wheat are similar.

In absolute terms, Indian wheat from open market costs around $285fob while grain of equivalent quality from black Sea is $230-235 fob/mt. Russia and Ukraine, because of their military conflict and western sanctions, have depreciating currencies which are also ensuring de-escalation in prices.  French crop is trading at historic lows at $210-215 with somewhat impaired quality. 

 Indian wheat export averaged around 6 mts per annum in last two years, both from FCI and private trade. Price realization varied between $275 to $310 fob/mt, devoid of any marketing subsidy.  Now, local market prices are no longer supportive even for private sector to match international competition while FCI is slush with stocks.  After exporting 1.7 mts in April-June 2014, overseas contracting has disappeared due to widening disparity. Even neighbouring Bangladesh prefers buying from far off Ukraine or Russia. Estimated projection for 2014-15 is “maximum” about 2 million—a drop of 66% from previous year.
 Is it not incumbent upon Government to reduce its debits/arrears by liquidating FCI’s overstocked wheat (35.5 mts as of 1st September 2014). Though Government has earmarked 10 mts wheat sale under OMSS( open market sales scheme), actual disposal may not exceed 5-6 million tons—the same as attained last year.

The moot point is--Will wheat export again be throttled “n-th” time by FCI inability to compete in the international market? Will India remain a wild –card entry with “off and on” billboard in global wheat trade? Do we not need to show some flexibility for being present in the market?


MSP and SAP are both administrative prices having random convergence or divergence with international values.  In raw sugar export this divergence is being taken care of for the benefit of private mills, their bankers and farmers because loss-prone concerns are raised with Government by mills’ associations/federations.   For wheat, Government’s own funds are involved.  Government/FCI has to introspect and strategize export parity (now about $235) like the way done for raw sugar to operate in market driven volatility.

It will be odd to apply price calibration for raw sugar export and ignore wheat by selective exclusion. If 10 mts wheat is marked for disposal—Food Ministry can assign 4 million tons for subsidized exports.  Absorbing inland transport costs/ ignoring local taxation and carrying expenses are the way out for subsidization. If it means reduction in OMSS wheat price—let that be so –for that will temper food inflation. If world market improves—as can be seen from future PSUs tenders-- such subvention can be eliminated or adjusted.

Thursday, September 25, 2014





Friday, September 19, 2014


Tejinder Narang (former Director PEC Limited)
Fully aware that the new Government will initiate reform process on FCI, I have already made some suggestions in the recent past. These have appeared in Economic times, Financial Express, Business line.  A synoptic view of the ideas is given below. Details can be accessed from the URL defined in each para.  
1         FCI should procure Rice only and not paddy FCI and State Government Agencies (SGA) of Punjab /Haryana under current dispensation first procure paddy and then get it custom milled from rice millers by paying fixed tolling charges. This system is exposed to massive abuse that needs correction by the new Government without affecting farmers’ interests.
FCI may limit itself to procurement of “milled rice” and dispense dealing with paddy purchases, which should be left to millers. Procedurally FCI may need to work out a fresh/revised Custom Milling of Rice agreement (CMR-REV) in which responsibility of paddy procurement at MSP will be of millers. Obligation of FCI will be to source predetermined tonnage of milled rice at a price notified and based upon MSP of paddy. Financing for the paddy to “approved” millers can be provided by banks, based upon letter of comfort from FCI.  Present procedure of distribution and subsidization to beneficiaries will continue.
2         GRAIN Storage--Can we take remove Arthiya and avoid Audit objections for superior silo storages? Can we afford grain handling without bags? Can we synchronize rail connectivity with silos? -- There are about 45000 arthiyas in Punjab alone who are intermediaries with procurement agencies for disbursement of payments to farmers (less commission).  Reduction in mandis or clustering thereof for silos may rattle their business of bagging/ weighing/ quality manipulation (to some extent) as handling/cleaning will be mechanized.   They are also financiers to the farmers.  Bank loans require procedures, collateral security and therefore are a deterrent to farmers.
An expert committee in Punjab listed several malpractices by commission agents: evasion of market fees; over weighing of agricultural produce of farmers; illegal gratifications to the procurement agency and the marketing staff at the expense of farmers and illegal commissions. (World Bank report 2003). Unless political will is demonstrated to break FARMER-ARTHIYA-PROCUREMENT- AGENCIES NEXUS, silo systems may not be easily workable and viable
3         NORTH –SOUTH divide in wheat prices  ----In Punjab/Haryana cities wheat is at Rs 1400/1600 per qtl while in Chennai/Hyderabad/ Bengaluru it is between Rs 2300/2750. Wheat in South is 70-90% costly than in North. Is wheat indicative of a commercial divide with in a country that distinguishes forces of supply/demand in the North and the South? The odd feature is the multiplicity of prices for wheat on per qtl basis—MSP Rs 1400; economic cost Rs 1993; OMSS Rs 1500/1570; APL Rs 610; BPL Rs 415 in addition those applicable under FSA. At macro –policy level, does not Indian Government need to consider “south-centric policy” for wheat? It is worth pondering to bridge north-south divide.
4         FCI needs professional advice, procedure to sell in open market and for exports. ---FCI lacks expertise in export marketing, which is outsourced for contracting and shipping operations to trading PSUs. Is canalizing exports through three PSUs is the only way out?  Why instant price discovery for export not possible? Should there be hedging operations? Why price discovery be done by the Government and not by the market?
Surely there is a need for complimenting the system of discovering the selling price in open market through expertise of an agency like CACP or a formal committee of reputed agricultural economists, FCI and traders, who like MSP, assess real time dynamics of domestic and overseas markets and decide the modalities of intervention-- including exports strategies whenever deemed necessary.  Even the differential pricing for old/new/damaged crop can also be recommended for intervention or exports.
5         USA CANADA wrong on wheat export subsidy  --The principle is to take the cost sans local taxes—as taxes cannot be considered for determination of export price. And “basis”—logistical expenses are added to the cost for arriving at FOB value at the port. A government notification on methodology of fixing export pricing needs to be issued  in which local taxes should be excluded, transport cost from the shortest route should be taken and system of calibration of fob values with relevant international values should be defined.
USDA’s tabulation of data to arrive at $85 billion (table below) as government support to agriculture is out right questionable. It covers -- capital and revenue expenditure on rural development (road, drainages etc.); major and minor irrigation, agro research; financial institutions’ support, export promotion boards, soil and water conservation, forestry/ wild life/animal husbandry etc. These add up to “extra” of $47 billion and do not constitute subsidies to farmers or traders by any stretch of imagination.
Reasonable calculations of support can include funding for FCI, fertilizer, power and state bonuses.  This amounts to  $(85-47)=$38 billion for or Rs.2,20,000 crores-- about 13% of Agro GDP of $284 billion and certainly not 29% projected by USDA. (See amended table). Gulati-Huda study on Indian agricultural subsidies around 10% is vindicated.

Monday, September 15, 2014



Tejinder Narang
This paper editorial “Cultivating Exports” of 6th September 2014 ( ) has   appropriately commented upon USDA report “India’s  Agricultural Exports Climbs To Record High”  of 29th August2014 ( ). USDA’s certification of steep ascension in agro exports from $5 billion in 2003 to $39 billion in 2013 may be flattering but facts and figures cited are debatable while conclusions are less than credible.
It states that “one of the driver’s behind India’s export growth has been the dramatic growth in government support provided to agriculture, particular for wheat and rice”. The truth is that Government support through of Food Corporation of India (FCI) during 2003 to 2011 was highly erratic (chart below).
In 2003-05, FCI’s non-Basmati rice export was 3 million tons (mts) and wheat about 8mts. FCI thereafter withdrew from exports. In next two rears-- 2005-07-- all Basmati (aromatic) and non-Basmati rice exports originated from private holdings. In 2006-08, FCI “imported” 7.2 mts of wheat. Effective October 2007, Government prohibited Non-basmati Rice and wheat shipments on pan India basis though Basmati deliveries continued. (Refer Government notifications 
From September 2011, Wheat and Non- basmati and wheat export was again revived unconditionally. It is grossly erroneous to label such go-stop-go signals and frequent policy interventions during 2003-11 as Government “support”. 

The upsurge in rice export after 2011 is attributable to India-Iran rupee payment agreement owing to US sanctions, higher yield per hectare of hybrid varieties ; India’s virtual monopoly in Basmati exports; Thailand over–pricing its  paddy procurement; China’s rice import form Vietnam  leading to firming up prices.  An “arm’s length approach” is the only support accorded by the Government for the rise in rice exports.
 USDA believes that higher MSP in last six years of rice (increased by 75%) and wheat (raised by40%) led to higher procurement and subsequent releases of stocked grains in the domestic market lowered prices “making Indian supplies more competitive”. On the contrary higher Government purchases led to inflationary pressures in domestic market making exports non-competitive. Furthermore rice was never released or auctioned in the domestic market but supplied only to targeted beneficiaries under PDS (Public Distribution System).  State governments are reluctant to lift such additional PDS releases for various reasons.(
USDA’s tabulation of data to arrive at $85 billion (table below) as government support to agriculture is out right questionable. It covers -- capital and revenue expenditure on rural development (road, drainages etc.); major and minor irrigation, agro research; financial institutions’ support, export promotion boards, soil and water conservation, forestry/ wild life/animal husbandry etc. These add up to “extra” of $47 billion and do not constitute subsidies to farmers or traders by any stretch of imagination. Financial Express editorial has rightly commented—“how can irrigation distort trade?” Or for that matter how agro –research/soil water conservation manipulate trade? 
 If intention is to allege or enlarge Indian subsidies in bizarre manner then USDA could have also included “establishment cost” of IMD (India’s Metrological Departments) for weather reporting or warnings, ministries of Food, Agriculture, Commerce, Finance, Customs, all state governments’ departments of Food and Civil Supplies Corporations. There is no end to such wild collation of data to justify a preconceived hypothesis.
Reasonable calculations of support can include funding for FCI, fertilizer, power and state bonuses.  This amounts to  $(85-47)=$38 billion for or Rs.2,20,000 crores-- about 13% of Agro GDP of $284 billion and certainly not 29% projected by USDA. (See amended table). Gulati-Huda study on Indian agricultural subsidies around 10% is vindicated.
 USDA inaccurately comments that wheat exports by the government are “at prices below acquisition and transport costs”. Government (FCI) initiated action on wheat from 2012 onwards only. Both Government and privates are competing for contracting. In 2012-13 shipments were about 6.5 mts—of which 3.5 mtsare from open market and balance from FCI.  Average fob realisation in 2012-13 is $310/mt fob.
“Acquisition” cost of FCI includes local taxes while grains are purchased on MSP (Minimum Support Price). Extant government policy is that taxes are not exportable. Local taxes are reimbursed to private exporters also. FCI cannot burden exports with local taxes too.  Taking 2012-13 MSP/mt of Rs 12850 + shortest route as per railway freight calculator ( from Indore-Madhya Pradesh to Kandla port (Gandhidham station) of Rs 990/mt + port handling Rs 500/mt, total cost is Rs 14340/mt. At $/Rs= Rs 54.40 in 2012-13, export price is $264/mt fob, while FCI realised about $310/mt fob. USDA has again erred.  Private trade too could make wheat shipments at almost matching prices discovered through FCI/PSUs tenders when overseas market scaled at peak and not, when values have bottomed out, as is the case now.
Export of cotton, soymeal, guargum, corn, buffalo meat and “other products” like tea, coffee, spices are totally market driven and pushed by private initiatives. Currently, there is a sharp decline in wheat, corn, soymeal, cotton, sugar export. Had there been any effective Government support, situation may have been different.
Brazil’s exports about 20 mts corn, 29mts sugar, 38mts soybean; 15 mts of soymeal while India’s export is 4mts corn, 1.5-2 mts sugar, nil for soybean; 4mts soymeal. India’s lead in percentage growth projected by USDA gives a distorted picture when compared in absolute terms.
This report definitely needs substantive correction in picking up relevant data, its tabulation and conclusions.