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Africa’s plea for grains: India on a sticky wicket

May 4, 2008
New Delhi,May 1,2008: Putting the Indian government in a diplomatic bind at a time when rising domestic food prices are causing political problems, several countries from west and central Africa, as well as Sri Lanka, have appealed for humanitarian food assistance that potentially adds up to some 1 million tonnes (mt) of foodgrains.

“We have a crisis gentlemen!May God be with us!”

So perhaps the lines will go, if it were fiction or perhaps even a film. But the bureaucrats up there in Delhi will be saying,

“We are on a sticky foot, gentlemen!”

And sticky foot it is. With the foodgrains cost doubling over the last three years, a folly of meeting our energy crisis without adequate analysis backup is gonna cost us. And God be merciful, if it stops with this. With what I can see, there are around half a billion people in Africa, Sri Lanka and other countries literally waiting for food to land.

One senior government official in New Delhi who is supposed to be close to the entire deal, has commented, it will not be exporting wheat in the light of the growing crisis in the home front. Hard truth yes it is. Bitter truth, oh yes you bet. We share a historically rich connection with Africa. Our troops in IPKF has made Africa their second home, economic aids have long been channelled from India to Africa, but in this moment of crisis,it seems nary a bit too tight, if we will be able to extend what they demand.A bit of statistics.

  • 13.5mt is what we have of rice now.
  • 1mt of rice is what they ask for.
  • 7.57% of inflation on home front, a 3 year high.
  • 83% of hike in foodcrops price.

It might seem preposterous to be anything other than ‘able’ to export foodcrops when it comes to first two numbers. But understand this fact, that India is battling supply side issues and huge inflationary pressure on its home front. The center has already taken effects to counter the supply side anomalies, and to counter a seamless flux of foodgrain supply.

Africa, on the other side, is facing a huge deadblock, from those countries who used to be traditional foodgrain suppliers turning their back on them. The supplies have stopped and they want it to keep flowing.

So the big question…

So will India respond to it? I do believe yes. India is primarily dependent on summer harvest of crops. And we have around 12.5mt coming in rabi crops, that is the winter harvest. On the last count, it was being speculated that this entire harvest will be exported to Africa as well as West too. With a flat pricing structure it may be selling gold for shillings. So I would, rather suggest, give Africa a discount, and charge a premium from West.

Lastly, is India learning anything from it? Indian government has mandated the use of 5% biohol to be mixed with gasoline and diesel from October of 2008. The decision was passed last year. So what is it going to be for industries like Praj Industries[PRAJIND], who are in this business? As I heard it somewhere… “Sonny, its time either to go long or its time to go short

[The author takes a passionate interest in economics,electronics and environment [all three Es], not necessarily in that order. When he is not blogging on markets, technology and their business issues, he spends his time conceiving and executing projects for a hi-tech electronics startup based out of South India. Mail him at sohamdas at gmail dot com. He is listening]


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