Relaxed norms to make wheat import cheaper

Wheat purchases through the new 2.2-million-tonne tender floated late on Monday are likely to be cheaper than the previous ones as the contract is expected to attract wider participation following relaxed quality specifications and a simpler import process, industry officials said on Tuesday.

Relaxation in import norms would see more bids coming in, particularly from US and Canadian wheat exporters, making the bidding process more competitive.

Eight players had bid for India's previous tender to import 3 million tonne of wheat, and only two had qualified on technical grounds. Deals were contracted for 8,00,000 tonne.

Of the deals contracted, Australia's AWB will sell 5,00,000 at $187 a tonne on cost and freight basis, while Switzerland's Agrico Trade and Finance SA will sell 3,00,000 tonne at $199.

In the latest tender, India is likely to clinch deals that are much cheaper than the previous ones since more companies are expected to participate in the bidding process, an official with a US-based trading house said.

"The new tender will essentially help import of wheat of US and Canadian origin as it allows weeds that were previously banned, has increased tolerance for pesticide residues, while doing away with a number of hassles such as methyl bromide fumigation," he said.

The new tender allows 31 quarantined and exotic weeds, which were banned earlier, up to the limit of 100 seeds per 200 kg of samples drawn from a single consignment.

It has also relaxed the tolerance limit for deoxynivalenol (DON) toxin, as well as for pesticides such as carbaryl, hydrogen phosphide, inorganic bromide and malathion.

The total limit of foreign matter, damaged, broken and shrivelled grains has also been increased to 7 per cent from the 5 per cent in the earlier tenders and exporters can now fumigate the cargo with aluminium phosphide instead of methly bromide.

The previous tender had allowed fumigation by aluminium phosphide at loading ports, but in-transit fumigation by methyl bromide was still mandatory. Prospective bidders, particularly from the US, had objected to the clause as methyl bromide is banned in some countries.

Under the new tender, exporters can now use either.

"These relaxations will work in favour of US exporters," another industry official said.

He said wheat from Canada could still face some problems as its moisture content is higher than the permissible limits.

Though the moisture content limit in the new tender is unchanged at 12 per cent, wheat with moisture content up to 13.75 per cent will be allowed after a price cut.

The official said though the relaxations in phytosanitary norms will help in broad-basing participation, the real benefit in terms of cost will accrue from the changes in the tendering process.

"One of the most important decisions has been to allow larger cargoes at ports on the west coast. It will lead to economy of scale and pare costs," he said.

The new tender seeks 8,00,000 tonne of wheat at Mumbai Port, 7,00,000 tonne at Kandla, 3,00,000 tonne at Mundra and 4,00,000 tonne at Visakhapatnam.

The Mundra Port allows berthing of large Panamax vessels with parcel size of 60,000-75,000 tonne.

The discharge rate at each port is also provided to enable prospective bidders to arrive at competitive bid price after factoring in such costs.

The performance bank guarantee has also been kept lower at 5 per cent of the total bid amount. In the last tender, the bank guarantee was 10 per cent of the bid amount, but was later slashed to 5 per cent.

Moreover, the process of realisation of payment has also been simplified. The exporters will be now paid immediately "at sight" after producing the relevant shipping documents. Earlier, they were being paid only after deliveries were completed.

Another major leeway provided to prospective bidders is that they have been allowed to obtain phytosanitary clearance certificates from private agencies accredited by the National Plant Protection Organisation of the exporting countries.

"This will cut down the time taken for obtaining the certificates as NPPOs of many countries take inordinately long time to clear cargoes," an official with a Singapore-based export house said.

He said the relaxations provided in the new tender are "fairly good" and should be able to garner a better response than the previous tenders.