June 27, 2007

 

India changes terms in wheat imports tender

 

 

India has brought about changes in commercial terms and conditions, including rate of demurrage, in its latest tender to import 1 million tonnes of wheat to try bringing down the cost of purchase.

 

Nevertheless, trade officials said the changes aren't enough to lower price bids at a time when global supplies are tight.

 

In a tender issued Tuesday (June 26) on behalf of the federal government by the State Trading Corporation of India (STC), the government reduced the validity period of bid bond and performance bank guarantee that a supplier has to submit with the sale offer and during confirmation of the contract respectively.

 

The maximum limit for the daily rate of demurrage has been increased to $30,000, according to the tender document.

 

"The bid-bond of US$1.5 million, or 3 percent of the value of the bid, whichever is higher, should be valid up to one month of the last date of the submission of the bids," the tender document said.

 

In earlier tenders, its validity was three months.

 

The performance bank guarantee, which is equivalent to 5 percent of the value of the contract and should be submitted on finalization of the contract, will be now valid for nine months instead of one year.

 

However, trading company officials said these are minor changes that won't make a significant difference in the price of bids.

 

India is seeking wheat between August and November.

 

Trading officials said that starting September, the number of cargos carrying imported fertilizers increase and there is acute congestion in some of the ports such as Mundra and Kandla on India's west coast, resulting in a large demurrage.

 

"Several demurrage claims from last year are still to be settled," one such official who refused to be identified said. "Unless India simplifies procedure to pay demurrage to suppliers, (suppliers) will continue to factor in a proportional premium, upwards of US$10 per tonne."

 

India allows fumigation of the cargo with aluminum phosphide for a period of at least 21 days prior to the ship's arrival into India, the tender document said.

 

The official said this increases the voyage time of the ship, and if the period had been decreased to 16 days, the price of bids could have been lowered.

 

In the latest tender, India has also allowed gearless panamax vessels in the southern port of Kakinada. Since these vessels can load up to 75,000 tonnes of wheat, it reduces the cost of freight. In earlier tenders, such vessels were allowed only in Mundra. 
 

India is seeking a total 470,000 tonnes of wheat in Mundra and Kakinada ports.

 

Unlike in the previous tender, STC has now stipulated that grab and crane charges for unloading wheat from gearless vessels in Mundra and Kakinada must come from suppliers.

 

A New Delhi-based commodities trader said this could push up price bids by around US$3/tonne to US$4/tonne.

 

A government official said the STC has to bear these grab and crane charges either indirectly through the price bid or separately, and it isn't a matter of concern.

 

The government official said that in the latest tender, of the total 1.0 million tonnes, STC is seeking 530,000 tonnes for delivery in October and November, a time when Australian harvest would have begun.

 

Australia's AWB Ltd., (AWB.AU) was STC's largest supplier by volume in 2006, at 1.595 million tonnes of a total import of 5.5 million tonnes, though part of the supplies were sourced by AWB from France.

 

Australian wheat wasn't offered in STC's first tender for 2007, issued in April to buy up to 1 million tonnes, due to tight supplies.

 

The tender was eventually scrapped because of price bids that India's federal government considered costly though two sellers agreed to supply a total 306,000 tonnes wheat at US$263/tonne in gearless panamax vessels at Mundra.