With the foodgrain production projected to touch 220 million tonnes this year, the agricultural gross domestic product is poised for a double-digit growth for the first time since 1988-89.

But analysts fear that over-production will lead to a crash in commodity prices, besides creating problems of surplus management.

Some analysts also feel that a sharp drop in prices may erode a part of the anticipated increase in rural income and the purchasing power.

The GDP numbers calculated at current prices, too, may be affected in such a situation.

Though the price line has tended to remain stable so far due to the season-end stock depletion, downward pressure will build up once fresh stocks start arriving in the next couple of weeks.

Apple prices are reported to have crashed to less than a half and, in some cases, one-third of their last year's level due to bumper production. A scarcity of boxes for packing the fruit has also been reported from some areas.

The Food Corporation of India feels that public agencies may have to procure a record 22 million tonnes of rice this year.

Besides, the FCI and state agencies will have to set up procurement centres even in areas where they normally do not operate.

The government has directed the FCI to procure bajra in Rajasthan, which is expected to produce three million tonnes of the crop this year.

Though the storage of procured stocks may not be a problem because of the reduction in overall grain holding following last year's drought, the food subsidy may be way above the Budget estimate of Rs 28,000 crore (Rs 280 billion).

Besides, grain inventories will climb from the current manageable level of 29 million tonnes.

According to S Prakash Tiwari, assistant director-general of the Indian Council of Agricultural Research, surplus management of non-food crops is likely to be a problem due to a shortage of infrastructure for post-harvest handling, storage and value-addition of farm produce.

Also, an inadequate and inefficient marketing network may come under additional strain.

At 220 million tonnes, the output of foodgrain this year will climb 20.5 per cent from 182.5 million tonnes last year. The growth in oilseeds production is anticipated at over 50 per cent.

The output of most other crops, barring sugarcane and jute, is expected to rise 10-20 per cent on the back of a copious and well-distributed rainfall this year.

The Solvent Extractors' Association has projected the kharif oilseed output to rise from 8.41 million tonnes last year to over 13.23 million tonnes this year.

In the ensuing rabi season, it anticipates an output of 10.45 million tonnes, against 6 million tonnes last year. The total oilseed output in 2003 is expected to climb 50 per cent to 23.68 million tonnes from 14.44 million tonnes last year.

According to the Fertilisers Association of India, urea sales rose 67 per cent in July and 44 per cent in the first fortnight of August.

Similarly, the sale of phosphatic fertiliser di-ammonium phosphate surged 10 per cent in July and over two-folds in the first half of August.

The sale of potassic fertiliser muriate of potash (MOP), however, displayed an erratic trend, rising 6.7 per cent in July but dropping 8 per cent in the subsequent fortnight.

The concern areas

• Prices may start going down once fresh stocks start arriving in the mandis.
• Apple prices have already crashed to less than a half of last year's levels.
• Rural income & purchasing power may be hit.
• FCI may have to procure a record 22 million tonnes of rice this year.
• Food subsidy may be way above the budget estimate of Rs 28,000 crore.