July 20, 2010

India's bumper wheat may prompt 40% import tax

The Indian food ministry has proposed an import tax of 40% on wheat to discourage cheap imports following a bumper crop.

"We will review in the next empowered group of ministers (EGoM) meet on whether or not to impose tax on wheat imports," food minister Sharad Pawar said.

Mr Pawar indicated that the price of wheat sold in the open market, or open market sale scheme (OMSS), by the government could be slashed further to encourage speedier offtake by states and freeing up of storage space.

A month ago, the EGoM had decided to offload five million tonnes of wheat in the open market over the next 10 months to keep food inflation in check.

To ensure the wheat does not remain with bulk consumers at major trading centres only, it also allowed smaller traders to purchase up to 30 tonnes of wheat per month at INR12.54 (US$0.27) a kg from any FCI depot.

The country's food grain stocks stood at 57.85 million tonnes by the end of June, more than double the requirement for state-run welfare obligations.

India's wheat harvest in the crop year ended June 30 is estimated at 80.98 million tonnes, compared with 80.68 million tonnes in the previous year.

The decisions on import duty and allowing exports were kept pending on account of apprehensions within the government over the performance of the monsoons this kharif sowing season. The government was keen that the detailed second stage monsoon forecast of the IMD be released before a decision to relax the restrictions was taken.