Foreign wheat may cost govt extra Rs 2,460/tn

The government is likely to pay Rs 2,460 more per tonne on imported wheat than it paid to farmers in its recent procurement programme. The exchequer will have to bear an additional burden of Rs 246 crore on the first import consignment of one million tonnes.

Sources in the wheat trade said the quotes for this tender could be as high as $320 (Rs 12,960) a tonne. In comparison, the government paid Rs 8,500 a tonne to farmers, including a bonus of Rs 1,000.

Last year, India imported 5.5 million tonnes of wheat at an average price of around $205 a tonne. The sharp rise in the price this year is because of an export ban in Ukraine, India's strict phyto-sanitary norms (that prevent the US from selling wheat to India) and expectation of a lower harvest in Australia.

For these reasons, bids are expected only from Canada, Russia and some European countries. Also, international rates spiral whenever India decides to import wheat.

The government has been forced to import wheat as the recent procurement fell short of the target. It bought around 11 million tonnes against a target of 15 million tonnes. This, however, is about 1.77 million tonnes higher than last year.

The central pool has 13.1 million tonnes, out of which the public distribution system will need 9 million tonnes till March 2008. This will leave 4.1 million tonnes as buffer at the start of the next year's procurement.

"Even if we do not get wheat from abroad, we are likely to start the next year's procurement with a buffer stock of 4.1 million tonnes, compared with the requirement of 4 million tonnes," said

Alok Sinha, chairman and managing director, Food Corporation of India (FCI). Still the government is going ahead with the imports at higher costs.

This year's average procurement cost for the FCI, including incidentals, has been Rs 9,400 a tonne. The cost of transporting wheat from Punjab to Chennai is around Rs 1,000 a tonne while the monthly storage and holding charge is Rs 200 per tonne.

So, the wheat procured by the FCI in May will cost Rs 11,000 a tonne in Chennai in August. The landed cost of imported wheat in Chennai would be higher than this.

If the offer price is $320 (Rs 12,960) a tonne, the difference comes to about Rs 1,960 a tonne, or Rs 196 crore for a million tonne. This is excluding the cost of unloading, packing and transportation from the port to the godowns.

So, the landed cost at the Chennai godown would be Rs 13,460 a tonne, Rs 2,460 per tonne more than the procured wheat. For a one-million-tonne consignment, the difference could be as high as Rs 246 crore.