Voluntary Report - Public distribution

**Date:** 4/17/2008

**GAIN Report Number:** IN8038

IN8038

**India**

**Agricultural Situation**

**Weekly Highlights & Hot Bites, #16**

**2008**

**Approved by:**

![](media/image1.wmf)Holly Higgins

U.S. Embassy

**Prepared by:**

Santosh Singh, Deepa Dhankhar, Amit Aradhey

**Report Highlights:**

\*Wheat Output: Trade officials keep fingers crossed; Government faces
policy dilemmas\*, \*Normal monsoon may ease inflationary pressure\*,
\*House fire over price rise\*, \*Imported food face ban for flouting
rules\*, \*Bharti makes low-key retail entry with easy day stores in
Ludhiana\*, \*Organized milk retailing set to grow significantly\*,
\*Poor may get imported edible oils cheaper\*, \*Prices fail to suppress
oil appetite\*, \*Rs.55,600 crore worth crop wasted every year\*.

Includes PSD Changes: No

Includes Trade Matrix: No

Trade Report

New Delhi \[IN1\]

\[IN\]

Welcome to Hot Bites from India, a weekly summary of issues of interest
to the U. S. agricultural community. The report includes information
that has been garnered during travel within India, reported in the local
media, or offered by host country officials and agricultural analysts.
Press articles are included and summarized in this report. Significant
issues will be expanded upon in subsequent reports from this office.
Minor grammatical changes have been made for clarification.

DISCLAIMER: Any press summary contained herein does NOT reflect USDA's,
the U.S. Embassy's, or any other U.S. government agency's point of view
or official policy.

**WHEAT OUTPUT: TRADE OFFICIALS KEEP FINGERS CROSSED; GOVERNMENT FACES
POLICY DILEMMAS**

The government is confronting serious policy dilemmas in ensuring food
security at a time when there is an ongoing food crisis,
internationally.  Stocks of food items are at historically low. 
Inflation in food commodities is also rising especially when elections
are near.  Ensuring food security entails procuring wheat and rice for
the public distribution system.  The current *rabi* (winter) crop's
marketing season is ongoing and the procurement so far reported by the
official agencies is disappointing as the farmers are not happy with the
minimum support price (MSP) offered by the government.  Farmers are
fully aware that the international prices of wheat are far higher than
the MSP and are therefore bargaining hard with their state level
political support to demand a MSP of Rs. 1650 per hundred kilograms of
wheat. The government is in a dilemma to support the farmer or to
protect the middle class from inflation. 

In the state of Madhya Pradesh, wheat from neighboring states is being
sold to receive the benefit of higher bonus offered by the state
government. The government's procurement may be short by two to three
million tons from the target of 15 million tons for the PDS.  This
certainly implies costlier food imports.  Therefore, ensuring food
security at a time of global crisis when the nation is not self
sufficient in food, is indeed the biggest challenge for a farming a
suitable government policy. (Source: The Hindustan Times, 04/15/08)

**NORMAL MONSOON MAY EASE INFLATIONARY PRESSURE**

Offering some relief to the government struggling to combat inflation,
the Indian Meteorological Department predicted near normal monsoon
rains, 99 percent of the long period average, boding well for crop
output in the ensuing kharif (summer) crop.  However, the IMD will issue
an update on the monsoon forecast in June, when it will also come out
with its prediction for different geographical regions of the country.
 Good monsoon rains will go a long way on easing pressure on the
supplies of several agricultural commodities whose prices have been on
the boil in recent months.  These crops include rice, maize, pulses and
edible oilseeds like peanut, soybean and sunflower as a sizable acreage
under these summer crops is rain dependent.  (Source: Business Standard
04/17/08)

**HOUSE FIRE OVER PRICE RISE**

Under fire from the opposition and the left allies, the UPA government
announced a slew of measures to check inflation in the parliament.
 Replying to a discussion on the price rise, Agriculture Minister Sharad
Pawar said that government would import one million tons of edible oils,
and 1.5 million tons of pulses to overcome the shortages and help
bringing down the prices.  The edible oil would be distributed through
the state public distribution system to be sold at a subsidy of Rs.
15.0/liter to people below poverty line and other weaker sections.  The
government would also take a decision on banning futures trading in
essential food items within 10 days.  The central government would also
convene a meeting of the state Chief Ministers on the issue of price
rise.  Blaming the global food scenario for the unprecedented price
rise, Minister Pawar said the scene in India was much better when
compared with other countries.  (Source: Hindustan Time 04/17/08, also
see 'No Shortage of Food Grains: Pawar' in Hindu, 04/17/08)

**IMPORTED FOOD FACE BAN FOR FLOUTING RULES**

Several imported branded processed food products may soon vanish from
Indian retail market as the government has decided to crack down on
imported products that flout the Prevention of Food Adulteration (PFA)
rules on labeling such as carrying vegetarian/non-vegetarian symbols;
'best before or expiry dates' in English,; batch numbers; importers
details; and maximum retail price (MRP) on the labels.  Some imported
products comply with the PFA guidelines, but they are a minority.  As
per the PFA rules, any violation can lead to heavy penal provisions
including jail sentence to the entire chain of operators starting from
the importer to the shopkeeper.  This move may have been fueled by
number of leading domestic food companies that want strict PFA
guidelines to be implemented for imported food products.  (Source:
Economic Times 04/17/08)

**BHARTI MAKES LOW-KEY RETAIL ENTRY WITH EASY DAY STORES IN LUDHIANA**

Bharti Enterprises Limited marked its retail foray with a low-key
opening of three grocery stores in Ludhiana, Punjab.  Bharti's retail
venture has been catching the media limelight since it announced plans
to join hands with the world's largest retailer 'Wal-Mart Stores Inc.'.
 However, street vendors and various politicians raised concerns about
Bharti and other big retail players entering the Indian market with the
fear of adverse affects on the livelihoods of small neighborhood stores
and street vendors who currently dominate the food and grocery sales in
India.  Therefore, the big organized retail players are now opting to
open stores quietly to avoid anti-retail protests.  Bharti's first
stores mark the run-up of the launch of supermarkets ranging between
30,000 sq. ft and 50,000 sq. ft and hypermarkets of 75,000 to 125,000
sq. ft.  The firm, plans to invest upto \$2.5 billion in building a
retail venture spread across 10 million sq. ft. of space by 2015.
 Bharti is one of the largest Indian firms to enter India's booming yet
controversial retail business.  Bharti's senior management has conveyed
that the venture will see consumers getting benefit on experience,
pricing, quality etc.  Farmers will also benefit by the additional
employment generation opportunities.  The Bharti-Wal-Mart joint venture
is expected to launch its wholesale (cash and carry) hypermarkets by the
end of this year or early next year.

(Source: The HT Mint, 04/17/08)

**ORGANIZED MILK RETAILING SET TO GROW SIGNIFICANTLY**

The organized milk retailing in India is growing significantly with the
milk production already surpassing 100 million tons.  The major
organized dairy sector players which at present occupy only 18 percent
of the total milk produced in the country are expected to capture more
than 30 percent of the organized markets.  There is a growing awareness
for hygienic and value added products and the organized players are
definitely going to play a critical role in the sector.  According to
the Director of the National Dairy Research Institute, the growth in
milk production is driven by increasing demand for value added products
and extensive dairy development programs initiated by the government. 
However, the level of integration of the dairy sector with the global
economy is relatively low and there is huge opportunity for further
expansion. (Source: The Financial Express, 04/12/08)

**POOR MAY GET IMPORTED EDIBLE OILS CHEAPER**

In a bid to quell the rising inflation, the government is considering
subsidized distribution of imported edible oils to benefit consumers,
particularly belonging to BPL families through state governments. Prices
of essential commodities have gone up by 5.2 percent during March, the
highest in any month during fiscal 2007-08.  Wholesale price index for
composite food during March went up by 6.6 percent as against 6.4
percent rise in the index of all commodities. (Source: The Economic
Times, 04/16/08)

**PRICES FAIL TO SUPPRESS OIL APPETITE**

As per data from the Solvent Extractors' Association of India, the
countries vegetable oil imports jumped 38 percent during November 2007
and March 2008 at 2.26 million ton as compared to 1.64 million ton
during the same period last financial year despite rise in prices of
imported oils.  The CIF price of RBD palmolein jumped 112 percent in the
last one year to \$ 1,354 a ton in March 2008 from \$640 a ton in March
last year.  Similarly, crude palm oil has gone up 104 percent to \$1,224
a ton from \$609 a ton, crude soybean oil up 111 percent to \$1,434 a
ton from \$680 a ton and crude sunflower oil by 155 percent to \$1,791 a
ton from \$703 a ton. (Source: Business Standard, 04/17/08)

**RS. 55,600 CRORE WORTH CROP WASTED EVERY YEAR**

The government has admitted before the Parliamentary Committee on
Agricultural Affairs that India's harvest losses of crop is estimated at
Rs. 556 billion (\$14.1 billion).  Foodgrains worth Rs. 165 billion (10
percent of total production), fruits worth Rs. 136 billion (30 percent),
vegetables worth Rs. 141 billion (30 percent) and livestock and fishery
produce worth Rs. 84 billion are lost annually due to mismanagement.
 Reacting to the information, the committee lamented the massive
postharvest wastages of agricultural produce noting that the processing
levels are very low compared to developed countries.  

The committee was very critical of the fact that the agriculture
ministry does not even collect actual post harvest loss figures and the
figures provided were rough estimates.  The parliamentary committee
castigating the ministry stated  "The committee is deeply perturbed to
note that even after existence of many decades, the Department of
Agricultural Research and Education (DARE) or the Indian Council for
Agricultural Research (ICAR) have no authoritative estimates of post
harvest losses till date' They further note " After 50 years of
existence in case of DARE/ICAR, this speaks volumes about the
irresponsible manner in which the two are fulfilling their mandatory
responsibilities". (Source: Times of India 4/17/08)

##### RECENT REPORTS SUBMITTED BY FAS/NEW DELHI 

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  **REPORT    **SUBJECT**                             **DATE SUBMITTED**
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  IN8035      Weekly Highlights & Hot Bites, #15      04/11/08
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