Sharp drop in procurement: Centre weighs 10% tax to rein in wheat exports

Exporters' mandatory registration on cards; PMO to decide on export ban

Concerned about the sharp drop in wheat procurement, the Centre might impose a nominal export tax of 10 per cent or make it mandatory for exporters to register themselves with a competent authority to slow the pace of shipment.

But it will wait for some time before taking a final call whether to ban export, senior officials and market participants said.

Another way it could discourage export is to stop issuing the registration-cum-membership certificate (RCMC) to exporters, required to get Customs and excise benefits.

“Not issuing the RCMC can discourage exports,” the official said. The maximum quantity each exporter can ship out can be fixed to stem the outflow.

“We have worked on four-five policy measures to curb this unabated flow of wheat from India. A final decision on this is yet to be taken. We are waiting for approval from the Prime Minister’s Office (PMO),” one of the people cited above said.

Trade sources said a nominal export duty of 10 per cent would make Indian wheat costlier by $35-40 per tonne in global markets, thus bringing it at par with the commodity from nations such as Argentina.

Indian traders are believed to have contracted to export around 4 million tonnes of wheat in less than two month of the marketing year.

Of that, around 1.2 million tonnes has been shipped out. This is nearly 56 per cent of the wheat exported from India in FY22.

Export demand from India has seen a surge this year due to shortage in world markets because of the Russia-Ukraine war.

Sources said Prime Minister Narendra Modi was expected to meet senior government officials from the Ministry of Food and Public Distribution and the Department of Commerce on Friday to discuss the matter and finalise a strategy.

“A decision on this is expected soon,” another person said.

On its part the food ministry is learnt to have directed the railways to stop prioritising wheat containers, while berthing in ports for containers carrying wheat is being delayed.

The decision to stem the outflow of wheat barely months after the government went euphoric about India “feeding the world” came after procurement for the 2022-23 season struggled to reach the revised target of 19.5 million tonnes.

This target was almost 56 per cent lower than the original procurement estimate of 44.4 million tonnes made in January.

Procurement dropped because farmers sold wheat to private traders who offered prices higher than the state-mandated minimum support price of Rs 2,015 per quintal.

Government purchases are suffering also because wheat production in the FY23 marketing year is expected to be 6-8 million tonnes lower than an earlier estimate of 111.3 million tonnes as a sudden rise in temperatures to record highs in March and April affected final yields.

Officials said the fear was that abnormally low levels of stocks could keep flour prices high in the coming months as well as crimping the Centre’s option to intervene in the market to cool flour rates.

Wheat flour prices in local markets have flared up in the past few weeks due to shortages of wheat.

According to media reports, the all-India monthly average retail price of wheat flour (atta) was Rs 32.38 per kg in April, the highest since January 2010, the earliest month for which data is available.

After assessing the falling inventories, the Central government a few weeks ago decided to allocate 5.5 million tonnes of rice in place of wheat to states for distribution under the government’s free ration scheme Pradhan Mantri Garib Kalyan Anna Yojana for five months starting from May.

“This will free around 5.5 million tonnes of wheat, which can then be used to build up stocks,” a senior official had said a few weeks back.