India discusses possible drought

India's government raised the possibility of a drought for the first time this year and said on Thursday that ministers would meet next week to discuss the lack of monsoon rains, which define output for the major consumer and producer of food crops.

 It will be the first time the Empowered Group of Ministers (EGoM) on drought has met since 2009, which saw the driest monsoon in nearly four decades in Asia's third-largest economy, where more than half of arable land is rain-fed.

 Halfway through the June to September season, rains are 22 percent below average, the India Meteorological Department (IMD) said on Thursday, days after the government kicked off contingency plans for a below-normal monsoon.

 "An (empowered group of ministers) on drought is likely to meet on Tuesday, but I am seeking the availability of other ministers," Farm Minister Sharad Pawar told reporters. "We will discuss the situation there."

 The meeting could be around Aug. 1, said V Narayanasamy, a junior minister in the prime minister's office, adding the government would review the situation after 15 days. "We have asked the states for their assessment reports and we will then verify independently to arrive at a decision," he told Reuters. 

 The four-month monsoon brings 75 percent of annual rainfall and half of that is usually delivered in June and July, when rainfall this year only managed to reach 2009's drought levels.

 The crisis for one of the world's largest consumers and producers of commodities including sugar, rice, cereals, oilseeds and pulses comes as global prices for cereals reach record highs on a major drought in the United States.

 New Delhi on Monday said the supply of water this year was below average but it stopped short of calling it a drought, which means rains at best 90 percent of long-term averages.

 The Indian Meteorological Department will issue its next official forecast, focusing on August and September, before the end of July.

 Parts of central India, the northern plains and the coastal belt should see moderate to heavy rainfall until early next week but western India and the interior south peninsula will continue to have a shortfall, said S.C. Bhan, a director of the IMD.

 The government is already providing supplies of high-yielding seed varieties, ensuring fodder availability and increasing power supplies to some areas as farmers across the country struggle to plant summer crops in the dry earth.    

 New Delhi, already battling to contain double-digit food inflation, now faces further price increases due to food shortages for its 1.2 billion people, some 42 percent of whom live in poverty.

 And increased demand for diesel, which is used for irrigation when rains fail, has put pressure on Prime Minister Manmohan Singh to hold off on widely anticipated fuel price rises, making budget targets harder to achieve.

 PULSES, OILSEEDS OUTPUT HIT

 Food Minister K.V. Thomas said the poor rains could cut output of pulses and oilseeds and that could mean India, already the world's largest importer of lentils and edible oils, has to buy more from overseas suppliers.

 Rains improved over soybean growing areas of central India last week, the IMD said, but it might not be enough to revive planting which is lagging last year for all crops except cane.

 Rice and cane production are not expected to suffer as farmers still have time to catch up on sowing with rains in West Bengal and Odisha only 2 percent below normal last week and ample in Uttar Pradesh, one of the top cane producing states.

 But at least for now, there are no plans to ban exports, Thomas added, although the government will review the situation in mid-August. India currently allows exports of rice, sugar, cotton, corn and wheat.

 New Delhi will also decide next week whether to ban futures trading in selected farm commodities that have seen extreme price moves, government sources said. Sugar and chick pea futures have been most volatile recently.

 On Thursday, sugar and chick pea, or chana, futures   eased on concerns the government might put restrictions on futures trade in these commodities.

 Soybean and soyoil futures , however, fell on a drop in the overseas markets and as rainfall in the top soybean producing Madhya Pradesh state in the past two days allayed concerns over poor yields.

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