March 22, 2010

India to allow duty-free wheat imports beyond deadline

A high-ranking Indian ministerial panel has approved tax-free wheat imports indefinitely beyond a March 31 deadline to boost local supplies and curb prices, a senior food ministry official said Friday (March 19).

The step is one of the measures taken by the federal government to bring down spiralling food prices, and in turn, curb surging inflation.

In February, India's wholesale price index-based inflation rate rose to 9.89% on year - the fastest pace in 16 months - driven by high food prices.

"The extension of the deadline will help bring down prices in domestic markets as traders will be pressured to sell their stocks," said Veena Sharma, secretary of Roller Flour Millers' Association of India.

The panel decided also to extend a March 31 deadline indefinitely to export only 650,000 tonnes of wheat products by private trade, the official said.

Indian mills have imported more than 100,000 tonnes of wheat in the financial year through March so far, and, are expected to import 200,000-250,000 tonnes of wheat in 2010-11, traders said.

Wheat production in the country - the world's second-largest producer - is expected to touch a record 82 million tonnes in the crop year ending June 30, 2010, which is bound to further put pressure on prices.

Last crop year, India produced 80.68 million tonnes. Wheat is sown in October-November and harvested from March-April.

India banned wheat exports in 2007 to increase local availability and control prices, but the likely record harvest this year, coupled with an already high buffer stock, prompted the federal government to consider allowing exports to free storage space for the new crop.

But Indian exporters have so far been able to ship only 50,000-60,000 tonnes of wheat products out of a total 650,000 tonnes that were allowed from July last year, after the federal government lifted the 30-month long ban.