World Grain News: Indian government increases sales price of wheat, rice, sugar

by Teresa Acklin
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   NEW DELHI, INDIA — The Indian government in January increased the sales price of wheat, rice and sugar to the Public Distribution System by a range of 5% to 44%, according to a recent U.S. Department of Agriculture Attache report.

   Wheat, rice and sugar are procured by the government and distributed through the P.D.S., a network of “fair price shops” that sell basic commodities at subsidized rates. All Indian citizens, regardless of income, may obtain ration cards which enable them to shop at these stores.

   This is the largest ever price increase, the attache report said, and is aimed at containing ballooning food subsidies.

   Several political parties, both inside and outside the coalition government, criticized the increase in the sales price of essential foodgrains and sugar, describing it as “anti-people” and “anti-poor.” However, the Food and Finance Ministry defended the price hike, saying that although the minimum support prices (prices paid to farmers) of wheat and rice have been raised several times, there has been no corresponding increase in the sales price (prices paid by consumers), which resulted in burgeoning food subsidies.

   The large increase in the issue price of government-held wheat is likely to increase free market prices, the attache report said, widening the spread between free-market prices and the government-announced wheat procurement price for the 1999 crop. This will likely have a negative impact on the level of this year's government wheat procurement, the report said.