May 9, 2006

 

India mulls wheat import duty cut to 10-15 percent

 

 

The Indian government could lower the import duty on wheat for direct users, such as bread, biscuit and flour manufacturers, to 10-15 percent, a senior government official said Monday (May 8).

 

"To enable local availability of wheat at reasonable prices, we have taken up a proposal to reduce import duty on wheat for actual users, though a final decision has yet to be made," the official said.

 

The proposal is aimed at reining in local prices of wheat at a time when most of this year's harvest has been hoarded by traders or held back by farmers in anticipation of better returns in the coming months, he said.

 

Views of the Parliament's standing committee on food will also be taken into account before the 50 percent import duty is lowered. Each federal ministry has a committee attached to it, comprising of members of Parliament.

 

Several members of Parliament have expressed concern over what they have termed "unabated imports" of wheat, which could discourage farmers from growing the commodity in the coming years, the official said.

 

The issue is also likely to come up for discussion when Parliament meets later this month after a recess, he added.

 

The Indian government has already decided to import 3.5 million tonnes of wheat and in addition, is considering importing another 2.0 million tonnes in the year to Mar 2007 to replenish its stocks for subsidised sale programmes.

 

In addition, it is considering a proposal to allow direct users of wheat to import predetermined quantities through government-owned companies at a lower duty but only within a stipulated time period, to ensure adequate supplies in the open market.

 

"On one hand we do not want to depress prices to levels where farmers are discouraged to sow wheat next year, and on the other, supplies in the market have to be maintained," the official said.

 

"A delicate balance needs to be struck," he said.

 

Officials from the food ministry are also in discussion with their counterparts in the agriculture ministry on the issue, he added.

 

The official said those who are against any further imports have stated that output seems to be normal this year around 73 million tonnes, and that those holding back stocks will have to come forward and make sales sooner or later.

 

This could lead to a decline in local prices of wheat around August, he noted.