India poised for wheat imports after six-year hiatus to bolster reserves
- In Reports
- 07:20 PM, May 29, 2024
- Myind Staff
India is set to resume wheat imports for the first time in six years to replenish depleted reserves and stabilise prices, according to sources. The decision comes after three years of disappointing wheat crops and coincides with the conclusion of general elections, which had previously been a significant obstacle.
Officials and other sources informed Reuters that New Delhi is expected to waive the 40% tax on wheat imports this year. This move will allow private traders and flour millers to procure wheat from major exporters like Russia, albeit in relatively small quantities.
The government is likely to wait until after June, when the new-season wheat harvest begins, to abolish the import tax, ensuring timely access to wheat from countries like Russia.
Pramod Kumar, the president of the Roller Flour Millers’ Federation of India, has asserted that there is a strong argument for abolishing the wheat import duty. He believes this action would be the most effective means to ensure an adequate supply of wheat in the open market.
A government source familiar with the matter has indicated that the government is likely to heed this demand. According to the source, the prevailing view is that the wheat import duty should be lifted after June, allowing private traders to import wheat.
However, to safeguard the interests of Indian farmers, the duty is expected to be reinstated before wheat planting commences in October. The source spoke on the condition of anonymity to outline the probable course of action by the forthcoming government.
As the Bharatiya Janata Party, led by Prime Minister Narendra Modi, is widely anticipated to secure victory in the election ending on June 1, traders express readiness to commence wheat imports if the government eliminates the 40% duty. Rajesh Paharia Jain, a trader based in New Delhi, suggests that around 3 million metric tons of imports, predominantly from Russia, would be adequate.
Jain asserts, "Once the government removes the duty, private trade can start importing wheat." This move aims to mitigate a potential price surge following the peak demand in October during the festival season.
According to a dealer from a global trade house in New Delhi, importing between 3 million to 5 million metric tons would obviate the necessity for New Delhi to offload significant quantities from reserves.
India, the world's second-largest wheat producer, faced a setback in its wheat crop due to a sharp increase in temperatures during 2022 and 2023, resulting in consecutive years of decline after five record harvests. Consequently, the Indian government imposed a ban on wheat exports.
Predictions from a prominent industry body suggest that this year's wheat crop will be 6.25% lower than the government's initial estimate of 112 million metric tons. Despite this decline, domestic prices have remained above the state-set minimum purchase rate of 2,275 rupees per 100 kg, and they have recently begun to rise.
State wheat stocks hit a 16-year low at 7.5 million metric tons in April, prompting the government to sell a record 10 million tons to manage prices. Removing the import duty will help maintain reserves above 10 million tons, a crucial threshold, according to officials.
Despite efforts to replenish stocks, only 26.2 million metric tons were procured against a target of 30-32 million, with state procurement unlikely to exceed 27 million. India requires nearly 18.5 million metric tons for its food welfare programme. The opposition Congress party pledges to double the monthly grain supply if elected.
New Delhi has resisted wheat imports to avoid farmer backlash but may reconsider after the election. Importing now could boost global prices, with Chicago wheat prices already surging due to Black Sea crop concerns. Removing import duties would make imports economically viable, according to flour milling officials.
Image source: Reuters
Comments