September 5, 2007

 

India key ministries oppose costly wheat imports
 

 

India's federal ministries for commerce and finance have expressed reservations over ongoing costly imports of wheat way above prices at which the local grain is available on the domestic market, a senior government official said Tuesday (Sep 5).

 

Rising international wheat prices have meant that India Monday bought 795,000 tonnes of imported wheat from three companies at prices between US$385/tonne and US$398/tonne, cost and freight basis, more than double the US$179/tonne at which it purchased wheat early last year.

 

"Since wheat is not being imported to meet any immediate needs but only to build a buffer stock for 2008, the ministries of commerce and finance have questioned such costly imports," the official told Dow Jones Newswires.

 

India has enough stocks of wheat to meet domestic demand for the next 12 months, but the food ministry does not want to take chances over the upcoming crop due for planting from next month to be harvested in April.

 

The official said the food ministry is pushing for imports despite high global prices, in line with a federal cabinet decision to contract such purchases of 5 million tonnes through a series of tenders.

 

Imports in the latest tender have taken place at an average INR15,670/tonne, while domestic wheat is available to mills in adequate quantities at about INR12,000/tonne.

 

The finance and commerce ministries have taken the view that India should wait for global wheat prices to fall before undertaking imports, as domestic production has been good this year.

 

According to government data, India's wheat output has increased to 74.89 million tonnes in 2007 from 69.35 million tonnes a year earlier.

 

However, the official said the food ministry has argued global wheat supplies are expected to tighten in the next few months due to concerns over the crop in Australia and limited availability in other wheat growing countries.

 

He said Pakistan and Ukraine are not exporting wheat and even Russia is considering restrictions on exports.

 

"Food ministry argues that there is panic buying taking place by consuming countries and after December, availability of the grain worldwide will be very limited," said the official.

 

He added that the ministry wants to start the next marketing year in April with ample stocks that can insulate the country from a possible lower wheat crop in 2008.

 

However, other ministries are not convinced and finalising of the latest import tender got delayed by several hours Monday due to their reservations over costly imports, according to the government official.

 

INR1 = US$0.0244 (Sep 5)