India to resume wheat imports by duty cut & make open market sales to cool prices

India is set to resume wheat imports by lowering duties while also imposing import limits and making open market sales, three officials told Mint. This is an attempt to tame prices and boost supplies.

The background

India, the world’s second-largest wheat producer, has a 44% duty on wheat imports, imposed six years ago, which effectively stopped shipments of the grain, according to the report.

“If duty is reduced, allowing private wheat imports, international wheat will likely reach India via all major south Indian ports from 1 July,” another official said.

Traders have been asking the government to relax import duties, so they can resume imports as international prices are low, the report read.

However, the matter is sensitive for farmers, with the government estimating wheat production for 2024-25 to be on par with last year at 112.9 million tonnes, according to the report.

The Centre closed wheat procurement at 26.6 million tonnes comparred to last year’s 26.2 million tonnes. The target was 31 million tonnes, the report read.

The numbers

“As per my understanding and discussions at the international grains council meeting last week in London, India might import a million or two tonnes of wheat to soften prices and keep a little extra for food security purposes,” M.J. Khan, chairman of the Indian Chamber of Food and Agriculture told Mint. “Given that wheat production estimates are at the same level as last year or a million or two less than that, it’s better that the government allows private trade to import a couple of million tonnes of wheat by lowering duty.”

If at all India imports, it is unlikely to be more than 3-4 million tonnes, one of the officials told Mint.

Open market sales

Additionally, 2.5 million tonnes of OMSS (open market sale scheme) is likely from July or August as per emerging requirements, one of the officials told Mint.

In the 2023-24 rabi season, the government released about 10.1 million tonnes of wheat under OMSS, the highest ever, the report read.

After NFSA (National Food Security Act) and other welfare schemes and buffer stock requirement, the government is estimated to have 8.2 million tonnes for OMSS, according to the report.

How will prices be impacted?

Currently, the price of wheat imported at Kochi port in Kerala and Tuticorin port in Tamil Nadu is $280-$290 ( ₹23,398 – 24,233) a tonne, with port handling and packaging costing another ₹1,500.

The price of wheat in key markets is in the range of ₹26,980 – 27,100 per tonne, while the minimum support price of wheat is ₹2,275 per tonne, according to spot traders, the article read.

All-India average price of the staple grain on Sunday was ₹31 a kg, a rise of 6.4% year-on-year and wholesale price was ₹27,720 per tonne, an increase of 6.6% on year, as per data from the consumer affairs ministry.

If the 44% duty is abolished, the effective price would be around ₹25,000 to ₹26,000 a tonne, according to the article.

Stock limits

As for stock limits, the third official said, “The permitted limit of 3,000 tonnes for wholesalers, 10 tonnes for retailers, 10 tonnes for each outlet and 3,000 tonnes at all depots for big chain retailers, 70% of monthly installed capacity multiplied by the remaining months of the current financial year in the case of processors has been proposed.”

In comparison, wholesalers in February were permitted to keep only 500 tonnes, retailers five tonnes, big chain retailers five tonnes for each outlet and 500 tonnes at all depots, processors 60% of monthly installed capacity multiplied by remaining months till April 2024, according to the article.

The annual wheat requirement for NFSA and other welfare schemes is 18.4 million tonnes and closing stock requirement by March 31, 2025 is 15.7 million tonnes, according to the report.

All three measures are in the pipeline as wheat prices tend to increase at the procurement season and peak in December-January.

This article has been republished from The Hindustan Times.

Leave a Reply

Your email address will not be published. Required fields are marked *

×