December 18, 2006

 

India's waiver of import duties on wheat makes little difference

 

 

India's two-month extension to Feb. 28 for wheat imports free of customs duty is unlikely to boost imports because supplies are adequate and local prices are low, trade officials and flour millers said Friday.

 

They said wheat imports ground to a near halt in early-October because high global prices made purchases from overseas very costly.

 

"The additional time for wheat imports at zero duty is not expected to have much impact on the market because imports are not taking place at all," said Atul Chaturvedi, president (Agro), Adani Exports, an Ahmedabad-based trading firm.

 

Apart from the import of 5.5 million tonnes wheat by the government, traders said it is difficult to arrive at the precise volume of imports by trading and processing companies in 2006.

 

"Wheat imports (in 2006), other than those by the government, are not as high as projected earlier - they may be anywhere between 600,000 tonnes and 800,000 tonnes," said S. Pramod Kumar, executive director, Belgaum Roller Flour Mills, in the southern province of Karnataka.

 

Trading and processing companies have obtained over 3 million tonnes of wheat import permits from the government since early July, and intial trade estimates projected actual contracts for imports of at least 1 million tonnes.

 

Kumar said additional time for wheat imports at zero duty may not result in any more import contracts for the time being but could have a psychological impact on market sentiments and soften local prices further.

 

An official at an international trading firm said large volumes of imported wheat, mostly of Black Sea origin, are still lying at the ports.

 

"Prospective local buyers have paid an advance of 5 percent but are yet to pay the remaining amount and lift the cargo. Unless the full payment is realized the importers may incur losses," said the official.

 

Kumar said there are ample local supplies available and local prices have also started to decline due to good progress in plantings in run-up to the next harvest from mid-February.

 

"Imports were contracted a few months ago in anticipation of decline in local supplies but no such slowdown has taken place," said Kumar.