Govt considers slashing wheat import duty

The Centre is considering slashing import duty on wheat to either 10 per cent or 15 per cent to boost domestic supplies in view of a shortfall in domestic output.
At present, import of wheat attracts a 25 per cent duty and flour millers have demanded its withdrawal. Even the food ministry is in favour of lowering the import tax as it is concerned about lower wheat purchase by state-run FCI despite projection of a higher output by the agriculture ministry.
"The government is seriously examining a proposal to cut wheat import duty," a senior government official said.
Though the industry is demanding withdrawal of the import duty on wheat, there are talks to bring it down to either 10 per cent or 15 per cent. A decision in this regard will be taken soon, the official added.

While retail prices of wheat are stable and there is no case as such for reducing the import duty at this point of time, the government is still looking into the matter as the FCI stock is declining.
Wheat stocks in the state-run Food Corporation of India (FCI) are fast depleting as private flour millers are increasingly buying the grain from the corporation in the wake of shortages in the market.

So far, FCI has sold more than 2 million tonnes of wheat via its open market sale scheme (OMSS) -- the highest in recent times. The corporation does not want to sell further as it has to maintain a buffer stock for the public distribution system and other welfare schemes.

That apart, FCI's wheat procurement this year has been lower at 22.9 million tonnes (MT) despite the agriculture ministry estimates of higher output at 93.50 MT for 2015-16 as against 86.53 MT last year.
Meanwhile, traders and flour millers are estimating a shortfall in domestic production by 5 MT. They have already contracted wheat import of 8,25,000 tonnes from Australia, France and Ukraine for delivery this year.
Last year too, private flour millers had purchased about 5 lakh tonnes of wheat from Australia for the first time in a decade due to sluggish supply and lower international prices.
Experts said the market behaviour signals shortages and therefore, millers are buying more grain from FCI and are even importing despite projection of a better output. The reduction in import duty will help millers source wheat from abroad and reduce burden on the FCI stock.

The state-owned FCI has a wheat stock of 24.2 MT at present.