Pawar's lapse costs govt Rs 180 crore

An "inadvertent lapse" by Agriculture Minister Sharad Pawar has cost the government around Rs 180 crore and ensured a killing for global suppliers of wheat.

Last week, at a meeting called by Prime Minister Manmohan Singh, which was also attended by Finance Minister P Chidambaram, a decision was taken that private players would be allowed to import wheat duty-free. So far, wheat could be imported duty-free only through the State Trading Corporation.

This was to correct the supply-demand imbalance caused by poor offtake by the Food Corporation of India earlier, causing a shortage.

However, all the ministers present agreed that this decision would be kept under wraps till the tenders for imports were opened.

In fact, the prime minister delayed sending the minutes of this meeting to the Cabinet Secretary till 11 am on Tuesday to prevent suppliers from raising prices and influencing the tenders that were to be opened at 3:00 pm on Tuesday.

But at a Food and Agriculture Organisation (FAO) meeting on fisheries on Monday, Pawar declared publicly that the import duty had been reduced to zero.

With nearly 24 hours left for tenders to open, there was panic as importers rushed to renegotiate the price at which they would import wheat because anticipating renewed and continuing demand from India, global suppliers pushed up prices.

Importers justified increasing prices on the grounds that world prices had gone up. But the rate of increase in world prices of wheat "" admittedly a highly price-sensitive commodity "" is lower than the sharp rise quoted by Indian importers. Till Monday, the world price of wheat was still only around $220 per tonne on average.

The last time STC imported wheat (27 July) it bought 3.3 lakh tonne at a price range of $209.75 to $214.75 a tonne.

The current import of 16.7 lakh tonne is likely to be contracted at an average price range of $235-240 per tonne. The difference, per tonne is nearly $23.

At $212 a tonne as the average price for the last tender, 16.7 lakh tonne of wheat cost only $354 million. But with $235 as the average price for a tonne, India will have to pay about $392.45 million.

If Pawar had not made the announcement ahead of schedule, India could have saved almost Rs 180 crore.

When Pawar was asked how this had happened, he said it was an inadvertent lapse. He thought the tenders had been opened at the time he made the announcement, he said. When Business Standard contacted his office for a comment there was no response.

A total of 8 bids to the tune of 27.26 lakh tonne have been received for the 16.7 lakh tonne wheat import tender. The price quoted by various companies is in the range of $223.75 to $270 per tonne, cost and freight.