Faced with a production glut, the Centre is toying with the idea of
imposing a 40 per cent Customs duty on wheat imports. The empowered
Group of Ministers on Friday discussed a proposal to this effect.
A note for the meeting said: “In view of difference of cost between
domestic wheat and imported wheat at Indian ports, the empowered Group
of Ministers on ‘Management of wheat and rice stock in the country' may
consider imposition of a 40 per cent duty on import of wheat at Indian
ports.”
No details were available on the group's decision.
A South India-based miller said if imposed, the duty will make imports unviable.
Currently, the landed cost of Australian wheat is $275 (Rs 12,375) a
tonne. A 40 per cent Customs duty besides transportation cost will be a
drain on the roller flour mills and bulk users. Consignments from the
Black Sea region are available at $225.
Some of the mills in South India are getting wheat from Bengal at their units at Rs 13,500 a tonne.
This means they are getting wheat at a price lower than the minimum support price of Rs 1,100 a quintal fixed for this year.
Farmers are resorting to sales of wheat below the support prices in
Uttar Pradesh, Bihar and West Bengal in view of poor infrastructure in
procuring wheat by the government agencies.
While the Food Corporation of India's procurement operations are in
full swing in Punjab and Haryana, the Madhya Pradesh Government is
procuring wheat on its own accord offering Rs 1,200 a quintal.
Wheat harvest in Gujarat is almost over (arrivals began in February
there) and the produce from the State has fetched good prices this year
in view of the quality.
Rising buffer stocks
The main reason for the Government to consider imposing Customs duty
on wheat imports is that it already has stocks exceeding 15 million
tonnes (mt). On top of it, it has targeted to procure 26 mt before June
30. Of this, nearly 15 mt have already been mopped with the crop
flooding Haryana markets due to early maturing.
Besides, the Centre has also drawn poor response to its open market sale scheme of wheat.
The Centre has tried various measures, including cutting the minimum
bid price by Rs 200 a quintal and offering the grain online, to reduce
its buffer stocks. The efforts have been in vain.
This year, the Agriculture Ministry has estimated wheat production
at 80.28 mt against 80.68 mt last year. Reports, however, say that the
output could be lower around 78 mt.
The Government had scrapped a five per cent import duty on wheat
when there was a crop shortfall in 2006. The duty was scrapped in
February 2006 mainly to facilitate imports by State-owned agencies such
as STC, MMTC and PEC.
Subsequently, the concession was extended in September to private
trade, leading to imports of over 8 million tonnes between 2006 and
2008.
Though the import duty remained zero despite ample stocks, the
Centre had allowed to lapse a change in the phytosanitary rules in 2006
to facilitate wheat imports.
Despite rigid phytosanitary rules, nearly one lakh tonnes of wheat
were imported last fiscal as the bulk users found it difficult to get
wheat from the open market.
The wheat was mainly imported from Australia through bulk containers
with the sellers having to clean the consignment before shipment.
The Customs duty move had its impact on the market on Friday.
May futures contracts on the NCDEX increased to Rs 1,169 a quintal
from Rs 1,152 yesterday. Long-term contracts such as for October were
up at Rs 1,254.
However, spot prices dropped Rs 5 a quintal to Rs 1,105.
Source : thehindubusinessline.com