Grains Oilseeds

[Tackler]

Imported food & fertiliser to cost India $5 billion this year

5 Feb, 2008, 0516 hrs IST,Nidhi Nath Srinivas, TNN

NEW DELHI: India may spend $5 billion shopping overseas for food and fertiliser this year as the 20% rise in global food prices takes its toll.
The bill for importing basic food items is likely to be 50% higher than last year while the expenditure on foreign-made fertilisers may be up 65%.

According to RBI, in the first five months of the fiscal (April-August 2007), the country has already spent $3.55 billion on imported food and fertiliser. This is almost equal to the country’s iron and steel imports during the same period.

Till August 2007, India has spent $1.75 billion importing bulk staples such as grains, pulses, cooking oil and sugar. It has spent another $1.79 billion on imported fertiliser. The most expensive items on the country’s shopping list were cooking oils and manufactured fertiliser. The country’s bill for cooking oils is up 40% while expense on manufactured fertilisers such as urea and DAP is up 70%. Globally, fertiliser prices surged 66% in 2007.

For import-dependent countries such as India, 2007 was a tough year on the wallet. For the average Indian consumer, things are getting worse. According to the latest government figures, compared to January 2007, rice prices are now up 13%, wheat 8%, atta 8%, tur dal 22%, mustard oil 20%, groundnut oil 28%, vanaspati 20%, milk 11% and potato 33%.

That is no surprise given the country’s increasing dependence on imported food. “International prices of wheat, soya bean, soya bean oil and palm oil increased 80%, 73%, 66% and 62% respectively, year-on-year, in December 2007. Consequently, the IMF food price index increased 26.4% on a year-on-year basis and surpassed the level that was last seen in the late 1980.

The supply-side pressures on global food prices do not appear to be abating, especially in the case of wheat and oilseeds/edible oils,” RBI has stated. Edible oils and oil cakes along with oilseeds accounted for more than one-fourth of the country’s headline inflation on January 5, 2008.

According to the World Bank, in December alone, wheat prices surged 14.5% on expectations that global stocks will fall to record lows due to drought that has damaged production in several major exporting countries, and to strong import demand.

Similarly, phosphate fertiliser prices continued to increase, with DAP up 14% due to strong demand and a 70% increase in the cost of phosphate rock, the dominant raw material for the production of phosphate fertilisers.

Slow-growing supply, low stocks and supply shocks at a time of surging demand for feed, food and fuel have led to drastic price increases, and the high prices do not appear likely to fall soon. There are about four times more net cereal-importing countries in the world than net exporters. Even though China is the largest producer of cereals, it is a net importer of cereals due to strong domestic consumption.