India has a huge population, but it is also one of the world’s biggest grain producers, achieving a high level of self-sufficiency. Even so, the combination of high prices and extreme poverty in sections of its population has made the supply of grains, and rice in particular, a hot political issue.

Concern over rice prices was behind the decision of India’s Cabinet Committee on Prices, taken on March 31, 2008, to double the minimum export price for basmati rice to $1,200 a tonne, which was cited by the International Grains Council (IGC) as one reason for the sharp rise in Asian rice prices. The same meeting agreed to a ban on exports of non-basmati rice.

However, the Reuters news agency reported on April 11 that rice exporters expect the government to allow exports of a superior grade of non-basmati rice. "We are expecting a decision on this in the next 10 to 15 days," Vijay Sethia, President of the All India Rice Exporters’ Association, told the agency. He expected the government to broaden the definition of basmati rice to include the high-yielding aromatic Pusa 1121 variety, which would allow exports.

With inflation running at a three-year high, India’s rising prices are fast becoming a political flash-point ahead of next year’s elections.

According to Frank Horan of U.K. ingredient importers Unicorn Ingredients, the election is behind much of what has been done. "There are all sorts of politicking going on in India," he told World Grain. "They’re heading toward election time."

Despite government controls, India is one of the world’s biggest rice exporters. According to the IGC, it will export 3.6 million tonnes in 2008, compared with 4.1 million in 2007. "In India, exports are forecast to fall for the second consecutive year amid tight availabilities of non-basmati varieties, e specially following the government’s further increase in the minimum export price," the IGC said. India is also one of the world’s biggest wheat producers. The

IGC has predicted a 2008 crop of 74.5 million tonnes, slightly lower than 75.8 million in 2007. "Harvesting has begun in southern areas," the IGC said in its report on March 28. "The crop in the north of the country is reported to be in good condition, but more precipitation is needed.

"Due to a 2.5% reduction in plantings, to about 27.7 million hectares, the outturn is expected to fall to 74.5 million tonnes," the IGC said. "Because of improved yield prospects, this is 1 million tonnes higher than previously forecast."

"Although potential exists to increase wheat yields in most states, realizing that potential is hampered by lack of irrigation, poor seed replacement rate and low input use," New Delhi, India-based U.S. Department of Agriculture (USDA) Ag Specialist Ayyapasore Govindan said in the most recent annual attaché report on the Grain and Feed sector in India. "The existing wheat varieties, released nearly a decade ago, are showing signs of fatigue. Furthermore, wheat production has become more vulnerable to changing climatic conditions, characterized by an earlier than-normal spurt in surface temperatures coinciding with the grain filling stage."

The IGC put India’s wheat consumption at 79 million tonnes in 2008-09, compared with 74 million in 2007-08. "India may again need to turn to imports in order to keep closing stocks at desired levels," the IGC said. "With production prospects in India not quite as good as last year and consumption continuing to rise, import needs could be sharply higher." Its prediction is 4.7 million tonnes, up from 2 million.

"Although consumer expenditure surveys by the National Sample Survey Organization (NSSO) show a declining trend in India’s per capita cereal consumption, including wheat, and an increasing trend in the consumption of high-value food products such as vegetables, fruits, and milk. Per capita wheat consumption in urban areas has been rising faster than in rural areas since 1993-94," the attaché report said. "Increasing urbanization, combined with a change in diet in favor of wheat and wheat products is likely to result in increased demand for wheat in the coming years. Wheat consumption in the traditionally rice-consuming southern Indian states is also growing rapidly."

Wheat exports were banned by the government on Feb. 9, 2007. Initially, the ban was to run until Dec. 31, 2007, but on Oct. 8 it was extended indefinitely.

"Had there been no export restrictions, large quantities of Indian wheat would have moved to countries such as Bangladesh and other Southeast Asian countries as Indian wheat is currently the lowest priced in the global market," the attaché report said.

India does export wheat flour. According to the IGC, it will export 10 million tonnes in 2007-08, compared with 50 million in 2006-07.

The IGC puts India’s total grains production in 2007 at 111.2 million tonnes, compared with 103 million in 2006. 2007 wheat production of 75.8 million tonnes compares with the previous year’s total of 69.4 million. India’s maize production is put at a record 16.8 million tonnes in 2007, compared with 15 million in 2006. However, the IGC predicted a fall in 2008. "Dry conditions could reduce plantings and lower production," it said.

Barley production is put at 1.3 million tonnes, compared with 1.2 million in 2007. The IGC puts India’s 2007 sorghum crop at 7.3 million tonnes, compared with the previous year’s 7.4 million.

The IGC estimates India’s total grain imports, all of which are wheat, at 2 million tonnes in 2007-08, compared with 6.7 million the year before. Its exports are put at 1.1 million tonnes, compared with 1.5 million in 2006-07. Wheat exports are unchanged at 100,000 tonnes.

"Maize exports by India have increased in 2007-08, with substantial sales to a number of customers in Asia, including South Korea, Malaysia, Thailand and Vietnam," the IGC said.

It put total marketing year exports (November/October) at 500,000 tonnes, compared with 400,000 in the previous year. "Helped by a large crop and competitive pricing, India has sharply increased sales to Asia in recent months," it said.

India is also a big soybean meal exporter. The IGC estimates its 2007-08 exports at 4.4 million tonnes, compared with 4.2 million in 2006-07. "Rising demand from Far East Asia will likely lead to a further rise in India’s exports," it said.

LAKHS OF MILLS
"Primary food processing is a major industry with lakhs of rice-mills/hullers, flour mills, pulse mills and oilseed mills," according to the Ministry of Food Processing Industries. A lakh equals 100,000. "There are several thousands of bakeries, traditional food units and fruit/vegetable/ spice processing units in unorganized sector," according to its website. "In the organized sector, there are over 820 flour mills."

That figure of 820 represents just a small proportion of the industry, Awadhesh Kumar, spokesman for the ministry, told World Grain. "It’s just mills for which we have licensed support. There are probably thousands more."

The industry involves a large number of small companies. "The companies are basically localized," Kumar said. "They operate on a regional basis. There is not a single company that has a pan-Indian market."

One reason for that is the large geographical size of the Indian market. "Once wheat is processed, it becomes perishable," he said. "It is very difficult for flour produced in Delhi to be transported to Mumbai, for example."

The attaché report noted there are around 1,000 medium-to-large flour mills in India. They manufacture mostly maida (flour), semolina and residual flour. Their capacity is around 24 million tonnes a year, but the actual level of processing is 10 to 12 million tonnes. The rest of India’s wheat, after what is retained by farmers for seed and feed, is mostly milled in small flour mills called chakkies.

"Most wheat consumption is in the form of homemade chapattis or rotis (unleavened flat bread), using custom milled atta (whole meal flour)," the report explained.

"Use of branded and packaged atta, marketed by large companies, is increasing in cities. With the organized retail sector booming with the entry of several large Indian conglomerates, more special purpose blends and brands are likely to emerge." Meda Dattaraj, Chairman of the Roller Flour Mills Federation of India and Chairman and Managing Director Krishna Flour Mills (B) Pvt Ltd, put the number of small flour mills at 25,000 or more. He told World Grain the industry needed to consolidate.

"When you have so many mills, with distribution arms and all those things, it will become critical," he said. "The handling of the wheat and the finished product has to become bulk." Consolidation is needed all through the chain, right down the bakery companies, he said.

Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.