India's coalition government is battling high food prices, largely a result of a spurt in the cost of vegetables -- as harvests were hit by rains -- and dairy products.
Food inflation in Asia's third-largest economy rose 17.05% in the year to January 22, while the fuel price index climbed 1 1.61%.
Food prices worldwide are hitting record highs and worries about damage from poor weather have led to warnings that prices of key grains could rise further this year, with shortages of staples such as rice and sugar already biting.
But India, where around 42% of the population lives on less than USD 1.25 per day, has overflowing grain bins and sugar output is forecast to jump in the new season that began in October after a normal monsoon in 2010 .
The government continues to worry about food security, however, after a drought in 2009 forced it to import sugar, sending global prices sharply higher.
Finance Minister Pranab Mukherjee will present the budget on February 28. and analysts believe he may unveil measures aimed at keeping a lid on prices.
Following are key facts about important farm commodities:
- On January 1, the country's wheat stocks were at 21.5 million tonnes against a target of 8.2 million tonnes. Rice inventory surged to 25.6 million tonnes against a target of 11.8 million tonnes.
- India, the world's second-biggest wheat producer, does not allow overseas sales. The country banned wheat exports in 2008 to tame high food prices. The export ban is likely to continue despite the country heading for a record wheat production in 2011, the fourth year in a row when output will exceed demand.
- India , the world's second-biggest producer of rice, is likely to continue with curbs on exports of the staple. India banned exports of common grades of rice in 2009 to bolster domestic supplies. The government permits overseas sale of aromatic basmati rice priced above USD 900 per tonne.
- India does allow the sale of small amounts of grains under diplomatic deals to neighbours. Last year, the country allowed exports of 300,000 tonnes of common rice and 200,000 tonnes of wheat to Bangladesh. It ha s also permitted the sale of grains to Nepal and Maldives.
- India does not allow futures trade in rice.
- The government is likely to free more grain stocks for subsidised sale to the poor. In December, the federal government freed up 5 million tonnes of wheat and rice for sales to states and bulk consumers as part of efforts to curb rising food prices.
- India, the world's biggest producer behind Brazil,has flip-flopped on unrestricted exports, popularly termed Open General Licence (OGL) sales , of 500,000 tonnes of sugar.
In December, a minister said mills could export 500,000 tonnes of sugar. But the government, bowing to public pressure over food prices, has referred the issue to a panel of ministers.
Industry body the Indian Sugar Mills Association (ISMA) has called for the government to allow the exports immediately to take advantage of high global prices.
- The government is forecasting production at 24.5 million tonnes of sugar in 2010/11, up from 18.8 million tonnes a year earlier . ISMA is forecasting 25.5 million tonnes of output.
- Mills are already exporting some white sugar to meet an obligation against imports of raws since 2004.
- Mills need to export close to 1 million tonnes of white sugar before March to meet the obligation.
- India relaunched sugar futures trading in December after it lifted a ban introduced in May 2009 when it faced shortages.
- India, the world's top buyer of vegetable oils, is expected to continue with duty-free imports of crude varieties. The country has no immediate plans to impose an import tax on edible oils, as any such move would stoke prices.
- Indian trade bodies want the government to impose a 10-17 percent import tax on oils to ensure higher prices for local producers on prospects of a good domestic oilseed crop.
- India is the world's largest producer of lentils and a big consumer. It allows duty-free imports to bridge its supply shortfall.
- Imports come from Australia, Canada and Myanmar.
- The policy of duty-free imports is expected to continue as lentils are an important source of protein for most Indians.
- India does not allow futures trading in two varieties of lentils. Introduction of futures trade in the two grades depends on domestic output. Unseasonal rains in November may hit lentil harvests.