A man arranges cereals and pulses in his shop for sale in Jammu, India, on Tuesday. (AP)

NEW DELHI, 2 April 2008 — On the brink of a food crisis, India on Monday night banned the export of non-Basmati rice and reduced import duties on edible oils.

The government’s decision had its impact on the market yesterday leading to a four percent drop in prices of soybean, soy oil and mustard. It led to a temporary halt in trading. There had been a sharp rise in prices of these three commodities, both in the last few months and in the futures markets.

The measures taken by government to combat inflation, at a Cabinet meeting chaired by Prime Minister Manmohan Singh, include a ban on export of non-Basmati rice with immediate effect. The government also decided to extend a ban on pulses export for one more year beginning Monday, Finance Minister P. Chidambaram told reporters.

Facing strong criticism from the opposition with little over a year to go before national elections, the left-leaning coalition has been scrambling to find ways to tame inflation, which touched a 13-month high last week.

Chidambaram said he “sincerely” hoped the steps would cool prices.

But India faces a daunting task in battling inflation, with much of it being propelled by soaring international commodity prices for food, energy and industrial metals, economists said.

“This is a worldwide problem. Almost every country has a food inflation problem, especially poor countries in Asia and Latin America,” said Dharma Kriti Joshi, principal economist at Indian credit rating agency Crisil.

If the latest measures prove ineffective, the Congress party-led government has little else in its arsenal to combat rising prices — apart from raising subsidies, they said.

The government slashed import duties on all cooking oils to zero. Import duties on maize were also cut to zero from 15 percent, while the export ban on pulses was extended.

All exports of non-Basmati rice were halted and the minimum export price for Basmati was hiked to $1,200 per ton from $1,100. The government earlier had slashed the import duty on cooking oils from 45 percent to 20 percent and had already ceased exporting most non-Basmati rice.

D. Raja, a senior leader of the communists, who prop up the minority government in Parliament, called the moves “too little too late” and vowed to go ahead with two days of nationwide anti-inflation protests later this month.

The main opposition Bharatiya Janata Party (BJP) also threatened national protests this month, saying the government had “betrayed” India’s teeming poor.

The Federation of Indian Chambers of Commerce and Industry said the government’s efforts would give short-term relief, but with global prices expected to rise more, India must focus on “its huge scope” for boosting farm output.

It is not the galloping prices of essential commodities alone that is worrying policymakers. Availability of food grain is also becoming a major problem as a result of falling productivity and lower buffer stocks, experts say.

“The government needs to be serious to avoid any food crisis,” said P. Chengal Reddy, secretary general of the Consortium of Indian Farmers Association (CIFA) — a forum that seeks to protect the rights of farmers at the national level.

“The fact that the share of agriculture in the country’s gross domestic product (GDP) has sharply gone down to 18.5 percent in 2006-07 from 36.4 percent in 1982-83 paints the real picture,” Reddy said.

Statistics available with the Ministry of Food and Civil Supplies also reflect the precarious situation, with the buffer stocks of both wheat and rice below the minimum level set by the government.

The stocks of these two commodities available in government warehouses were 19.2 million tons in January against the minimum norm of 20 million tons. This is a sharp decline from the level of 24.4 million tons in January 2004.

This apart, the rate of growth of food grain production actually decelerated to 1.2 percent between 1990 and 2007, lower than the annual average population growth of 1.9 percent, official data showed. “The chances of having a food crisis can’t be ruled out if the government does not take corrective measures by increasing the productivity of farmers,” said Devinder Sharma, a food and agriculture policy analyst.

— With input from agencies