The Government of India today announced it has earmarked Rs3.5bn (US$75m) for wheat farmers in Punjab. This amount will cover the additional cost of concessions made today, which include permitting upto 8% (in place of 3% till date) faulty wheat in the wheat purchased from the farmers by the Government. The wheat will be procured at Rs. 5.40 and Rs. 5.10 ($0.11 to 0.12) per kg for the two main varieties grown in Punjab.

The farmers have been agitating for a while now, and had blocked a major rail line Northwest of capital Delhi, between Ludhiana and Ferozepur for four days running. Ludhiana is among the three important Industial and Commercial cities of Punjab, and Ferozepur a major Rail Junction. Despite the government announcement, the farmers have not yet stopped the agitation.

Punjab is India's granary. High yielding varieties of all crops are grown through intensive farming methods and fully irrigated land with two crops per year. Major companies in the branded packaged food business, including Pepsi (Frito Lay) and Hindustan Lever Ltd, have contract farming operations in Punjab.

Agriculture is heavily subsidised in India, through guaranteed quantity and price of government purchase, and massive subsidies on fertilisers on top of concessional pricing for the main input, Naptha.

Partly based on a paranoia carried over from British times when famines used to wipe out millions in far flung villages, the government continues its policy of huge "buffer stocks" of foodgrain stored by another Government company, in Warehouses throughout India, where an estimated one third is eaten by rats or pilfered by humans before reaching the 'Public Distribution System.'

By Navroz Havewala