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India needs 30 pct of grains output for new food bill

posted Nov 27, 2011, 9:36 PM by Puneet Goyal
By Jo Winterbottom and Mayank Bhardwaj
NEW DELHI | Fri Nov 25, 2011 10:48am IST

(Reuters) - India is assuming grain purchases at around 30 percent of output in plans to expand its welfare programme, the food minister said, relying on increased yields and lower wastage to cover extra requirements and keeping exports on the agenda.

"We have made the calculation (for the Food Security Bill) on the basis of the grains we can produce and procure. We will procure only 30 percent of our production, 70 percent will remain in the open market," K. V. Thomas told Reuters.

The bill, which seeks to expand supply of subsidised food to 67.5 percent of India's 1.2 billion people, is likely to be introduced before the current session of parliament ends next month and could be ratified into a law by February, he said.

"We currently need about 25-28 percent of our total production for subsidised sale (to the poor). Our need will go up to 30 percent. That's our estimate," Thomas said in an interview late on Thursday.

India, the world's second-biggest rice and wheat producer, aims to grow 186 million tonnes of these grains in the crop year that began in June 2011. In 2010/11, output was at 181.25 million tonnes.

In September, the government allowed 2 million tonnes each of wheat and non-basmati rice exports, easing a ban clamped down since 2007.

Staples of rice and wheat are currently sold at subsidised prices with the focus on the very poor, but the Congress party led by Sonia Gandhi made it an election pledge to expand cheap food distribution and increase amounts.

The government has outlined the number of beneficiaries it wants to target in the Food Security Bill. But the food minister said 30 percent of total production would be the benchmark.

Under the Food Security Bill, nearly 75 percent of the rural population, or 630 million people, and 50 percent of urban people, or 180 million people, will be eligible to receive grains at cheaper rates.

The beneficiaries are divided into "general" and "priority" households with the latter recognised as the more vulnerable group but yardsticks for this have not been decided yet.

The bill identifies 46 percent of the rural beneficiaries and 28 percent of urban beneficiaries as "priority" households. About 40 percent of India's population live below $1.25 a day.

The "priority" group will get rice at a fixed 3 rupees a kg, wheat at 2 rupees a kg and coarse grain at 1 rupee a kg. The general category, both in rural and urban areas, will get grains at half of the price the government sets for payment to farmers.

"In case our output goes up, we will increase the allocation for different categories. To meet the requirement, we have other mechanisms -- we can raise production and productivity, we can reduce wastage by investing in transportation and storage," Thomas said.

Once the Food Security Bill is implemented, Thomas said the government's subsidy for providing cheaper grains to the poor would reach to 1 trillion rupees ($19.2 billion) from around 700 billion rupees now.

The government's current food welfare scheme covers about 180 million of India's poorest who receive about 4 million tonnes of grain every month. It is not clear if the proposed law will subsume the existing quota to avoid overlap.

About 70 percent of Indians live in rural areas, forming the core voter base of political parties.

The annual requirement for rice and wheat under the draft law will be at least 45.6 million tonnes, calculated on a monthly outlay of 3.8 million tonnes.
(Editing by Krittivas Mukherjee)