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High global prices make wheat import unviable

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Crisil Marketwire New Delhi
Last Updated : Feb 06 2013 | 9:09 AM IST
High international prices make wheat imports by India unviable in the current scenario, where the government levies a 50 per cent Customs duty on the commodity, traders said Friday.
 
They said it is too premature to talk of imports now, when wheat has just been harvested and procured in the country.
 
"I do not think there will be imports at this stage. For imports to happen, cabinet will first have to agree upon a customs duty waiver for the commodity," said Anil Monga, managing director, Emmsons International, a Delhi-based trading house.
 
The 50 per cent duty makes it too costly to import wheat, whose prices will then be much higher than the prevailing market prices, he said.
 
"The situation is quite premature. We do not even know whether the government will allow duty-free imports by private traders," said Apurva Dave, an official of Ahmedabad-based trading firm, Adani Exports.
 
Traders are still allowed to import wheat, but given the high duty levels, it is simply unworkable, he said.
 
Regardless of origin, import of wheat into India will cost at least $185-190 per tonne, cost and freight included, he said.
 
Cheapest Australian wheat is currently available on free-on-board basis at $140 per tonne, from Argentina at $125 a tonne and Russia or Ukraine at $115 a tonne. But with freight costs from these origins to Indian ports ruling high at $40-60 a tonne, prices become exorbitant, Dave said.
 
The duty will work out to be around $90 per tonne and there will be additional charges of $10 for processing, handling and inland freight, which could be even more if transportation is for longer distances, traders said.
 
As a result, imported wheat will cost not less than $285 a tonne, or Rs 12,400 a tonne, against the current wholesale prices of Rs 7,600 a tonne.
 
This is not a workable proposition at all, they said.
 
Moreover, imports are still being looked as a means of last resort, to be undertaken only if prices skyrocket or there is an unprecedented depletion of government stocks.
 
Government still has an estimated 14.7 million tonne of wheat in its possession, sufficient to meet the demand under the public distribution system and service food-for-work programmes for another nine months.
 
By the time, these stocks come down to nil, there will be the next wheat crop, due for harvest in April, 2005.
 
However, traders feel, as the stocks gradually come down and the winter approaches, prices are likely to inch upwards, and imports may become unavoidable.
 
Wheat is harvested in April-May and government procurement is over in June. For the next nine months, it is only consumed and not produced.
 
"Imports, as a price-sobering mechanism, cannot be ruled out," said a Delhi-based trader.
 
But for this to happen, government will either have to cut duty for private traders or undertake its own imports through public sector enterprises like PEC Ltd., MMTC Ltd. and State Trading Corp.
 
As of now, government is toying with the idea of allocating more rice rather than wheat for its welfare schemes and food-for-work programmes.
 
Wheat procurement in the current April-March season has slipped to only 14.8 million tonne, as on Jun. 14, against 16.7 million tonne in the year-ago period. Procurement of rice in the season to September is expected to touch an all-time high of 24 million tonne, against 22.8 million tonne in 2003-04.
 
"If we have lost two million tonne of wheat (in procurement), we expect to gain a million tonne of rice," said Food Secretary S K Tuteja.
 
Costly crop
 
  • Government imposes a Customs duty of 50 per cent on wheat which makes it too costly to import whose as prices will then be much higher than the prevailing market prices
  • Regardless of origin, import of wheat into India will cost at least $185-190 per tonne, cost and freight included
  • Currently available on free-on-board basis at $140 per tonne, from Argentina at $125 a tonne and Russia or Ukraine at $115 a tonne
 
 

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First Published: Jun 20 2005 | 12:00 AM IST

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