June 7, 2010

India considers import duty on wheat

With supplies of wheat rising in the country, key ministers on food will examine the food ministry's proposal of stopping zero-duty wheat imports by imposing reasonable tariffs, according to a government official.

Wheat stocks with the Food Corporation of India (FCI) is currently estimated at over 35 million tonnes, with over 22 million tonnes of wheat procured till late last month. The coffers are literally over-flowing as the buffer norm for wheat is only four million tonnes and strategic reserve is pegged at three million tonnes.

"There is a growing demand even from some industry associations for imposition of duties on wheat imports as it is available at prices lower than domestic wheat," a commerce department official said. The food ministry had made a demand for 40% import duty on the food grain in April this year that was set aside by the Empowered Group of Ministers (EGoM) as it wanted food inflation to cool down further before taking a decision. Now that wheat stock has risen even more and the FCI is facing stocking problems, the food ministry is pushing its case again. The EGoM on food, headed by finance minister Pranab Mukherjee, is expected to meet late this week.

The government opened up wheat imports at zero duties from November 2009. A spurt in prices of domestic wheat in the recent months has increased the demand for imported wheat from Australia from millers, especially in southern states.

While the government is open to looking at imposing import duties on wheat, allowing exports of the food grain from the country still seems to be a far call. "Allowing wheat exports is a very sensitive issue and I don't think the government would want to take a call on that at the moment," the official said.

As per the second advance estimates of the department of agriculture, production of wheat to be marketed in the rabi marketing season of 2010-11 would be over 80 million tonnes, comparable to production in the previous year.