Govt must protect farmers from cheap imports

NEW DELHI - The government, which allows tax-free imports of wheat and sugar, must protect its farmers from cheap overseas purchases as global prices tumble, Farm Minister Sharad Pawar said on Tuesday.

Hit by poor output, India, the world's top sugar consumer, abolished a 60 percent import tax on the sweetener in April 2009. The country, the second-biggest producer of wheat, allowed tax-free imports of the grain in early 2007.

India's sugar industry has been demanding an import tax on sugar saying foreign shipments would be cheaper than locally produced sugar, making it difficult for millers to pay a good price to cane farmers.

Indian traders have also imported small amounts of wheat in recent months for domestic flour millers, as international prices were lower than local rates, which rise as government agencies, the biggest buyers, pay attractive prices to farmers.

"If anybody wants to dump cheap products, how can we sit as a silent spectator?," Pawar asked.

"We have to protect farmers," he told reporters.

Alarmed by a freefall in global prices of both wheat and sugar, some industry bodies have intensified their demand for protectionist measures against cheap imports.

Benchmark New York raw sugar futures have more than halved since they soared to a 29-year peak in February as prospects of imports by India diminished, while supplies from Brazil are expected to rise.

U.S. wheat futures fell over 3 percent on Monday to $4.92-¾ per bushel, 63.5 percent lower from a peak of $13.495 a bushel two years ago.

India's buoyant output estimates are one of the reasons behind falling global prices of wheat and sugar.

Pawar said the country was expected to produce around 18.5 million tonnes of sugar in the year to September, up from 14.7 million tonnes a year ago.

Wheat harvests in 2010 were likely to be around previous year's level of 80.7 million tonnes, he said.

This year's wheat output will exceed demand for the fourth consecutive year in the country, which is now running out of space to store the grain.

"We will give more to states," Pawar said.

To trim mounting stockpiles, a panel of Indian ministers last week decided to provide 3 million tonnes of subsidised wheat and rice in aid for states in the next six months.

source: reuters