Wheat import tranches to cost govt dear

Tendering delay and smaller contracts result in Rs 245 crore loss.

The government's decision to import wheat in tranches is estimated to have caused the national exchequer a loss of about Rs 245 crore.

The wheat stocks in the central pool were 93 lakh tonne as on June 1 this year. By this time the government had contracted imports of about 13 lakh tonne.

The government requires about 13 lakh tonne every month for its Public Distribution Scheme. At that stage, the country would have required about 130 lakh tonne before the next year's procurement in April. Based on this, the country needed to import about 24 lakh tonne.

However, the government decided to import 42 lakh tonne more so that the buffer stocks is comfortable at the start of next procurement.

But this amount was contracted in series of tender extending over three months during which the international wheat prices rose by about $15-30 a tonne.

In June, the government contracted imports of 22 lakh tonne wheat at an average rate of $198 a tonne.

It contracted another 3.3 lakh tonne again in July tender at an average rate of $213 and 16.7 lakh tonne in August tender at an average rate of $229 a tonne. For the last two tenders totalling 20 lakh tonne, the government would pay about $452.7 million.

Had this amount been contracted in June, it could have finalised the deal at a rate of about $200 a tonne, making for the total payment of $400 million. The difference between the two amount is about $52.7 million (about Rs 245.15 crore).

"The policy of the government would be to induce a sense of confidence in the domestic market by virtue of its stocks and thereby discourage private trade from taking advantage of the situation", said the secretary of Department of Consumer Affairs L. Mansingh in a press briefing last month.

According to Mansingh, the wheat stocks in April touched a minimum of 20 lakh tonne against the buffer norm of 40 lakh tonne.

This acted as a disadvantage and the procurement fell. This also induced the private trade to procure sizeable stocks. However, next April the government would try and maintain the buffer stock of 40 lakh tonne.

Thus far the country has contracted a total of 55 lakh tonne of wheat through five tenders floated by the State Trading Corporation (STC). After every wheat tender, the government said it would not import any more wheat but it continued to come up with import tenders every month since May.

The government's assessment of wheat production, requirement and shortage seems to have failed miserably. The wheat production forecast for 2005-06 year was reduced from 73 million tonne to 695 lakh tonne.

The procurement also fell from 148 lakh tonne in 2005 to 92 lakh tonne in 2006.