February 24, 2006

 

India finds it cheaper to import wheat than supplying from north

 

 

The cost of importing wheat to southern India will be lower than that of supplying it domestically, Food Minister Sharad Pawar said Friday.

 

"If we include the cost of transporting wheat to the southern states from the growing regions in the north to the local price of purchase, then the imported wheat will be comparatively cheaper," Pawar told India's upper house of parliament.

 

The final decision on the price at which India will import 500,000 tonnes of wheat via government-run State Trading Corp. will be taken in the next few days, he said.

 

However, Pawar did not reply to queries on whether the price of the imported wheat will be lower than the government's own intervention price of INR6,500 (US$146) a tonne at which it plans to buy 16.2 million tonnes wheat from local farmers in 2006 beginning next month.

 

The government is buying wheat to replenish its own stocks for running its subsidised sales program and to meet exigencies such as drought and floods.

 

According to industry estimates, transporting wheat to South India from northern Uttar Pradesh state costs around INR1,000 (US$22.5) to INR1,200 (US$27.0) a tonne.

 

Adding it to the intervention price of INR6,500 a tonne (US$146)would result in an approximate cost of INR7,500 (US$168.8) to INR7,700 (US$173.2) a tonne to supply it to states in south India, excluding miscellaneous costs such as loading, unloading and storage.

 

The government is currently selling wheat to flour mills in south India at INR9,480 (US$213.4) a tonne. It also charges an additional 2 percent tariff on such sales.

 

Only one of the eight bids submitted against a tender floated by India's State Trading Corp's to import 500,000 tonnes of wheat is deemed to meet the necessary technical standards, an evaluation revealed earlier this week, a company official said.

 

According to the tender, the wheat has to be of the current 2005-06 crop and will be imported via the country's five south Indian ports - Mangalore, Chennai, Tuticorin, Visakhapatnam and Cochin - between March and mid-May.

 

At least 250,000-300,000 tonnes has to arrive by April.