India. Wheat scarcity leads to jump in import

14.09.2016

There has been a phenomenal increase in the price of wheat in India in the last few months due to falling production and low procurement by government agencies specially at a time when the price in the global market is low.

Import of the grain has increased, as that is viable in some centres in south despite 25 per cent import duty.

Initial estimates suggest wheat import this year will be 2.3 million tons which was not seen since 2009. Reports suggest if import duty is cut, import will rise to 3-4 million tons.

From April onwards, wheat prices have gone up in India by 15 per cent.

Trade and user industry is craving for the abolition or cut in import duty of wheat which is at 25 per cent, fresh contracts of 1 million tonne have been singed recently, said informed sources.

The superior quality Australian wheat is available at $225 per tonne and Ukrainian wheat is available at $195 per tonne.

Despite a high import duty of 25 per cent on wheat, the landed cost of imported wheat is Rs 2125 per quintal to 1850 a quintal (depending upon the quality) against the average price of Rs. 2000 per quintal of wheat liquidated by Food Corporation of India under OMSS (Open Market Sales Scheme).

In southern state wheat cost more due to higher transportation charges.

Officials in FCI informed that the demand for wheat under OMSS has been exceptionally high this year and 2 million tonnes of wheat has been sold till 8 September under the e-auction of OMSS against a minuscule 3.58 lac tonnes in the corresponding period last year.

He agreed that if the trend continues there may be difficulty in tackling the situation as demand picks up significantly during and after festival season.

The total annual sale of wheat under OMSS last year was 7 million tonnes, he informed.

The annual requirement of wheat for Public distribution system is 24.5 million tonne. The Food Corporation procured 23 million tonne this year against the estimated target of 28 million tonne. The opening stock of wheat as on April 1, 2016 was 13.85 million tonne.

The average annual requirement of wheat for PDS and OMSS (24.5 million tonne and 7 million tonne) and FCI has an estimated stock of 36.8 million tonne from April 16 to March 17.

The trade estimates predict a higher demand for imported wheat, somewhere close to a million tonne by the private millers this year FCI is hand to mouth with its wheat stocks.

“We could have imported 3-4 million tonne as the prices are at a rock bottom level in the international market had the duty been kept at 10% and not revised to 25%.

The escalation in wheat price, that has been creating holes in consumers’ and millers’ pocket would have averted by importing higher quantity at a lesser price”, told an importer who did not wish to be quoted.

Multinational companies, flour millers and a few wheat product makers are said to be importing and have contracted for another million tons import and if duty is relaxed, imports this year is expected to be 3 to 4 million tonne.

Even at current rate Edelweiss Agri Research report puts import estimate for the current season at 2.3 million tonne and it will revise it upward if import duty is relaxed.

Ministry of agriculture’s fourth advance estimate lowered crop estimate at 93.5 million tonne for when but Edelweiss Agri Research estimates, “crop at 82.64 million tonne. Trade sources puts it at 80 million tonne and USDA estimated it in August at 88 million tonne,” said EAR report.

Adi Narayan Gupta, a miller from Uttar Pardesh and a senior member of Roller Flour Millers Association of India said that a relaxation in import duty may have direct implications the millers in South due to proximity to port but it will have repercussions on millers in other parts of India too as lesser demand will ease out the prices.

According to sources, 5 lac tonne of import was imported last year. This year 1 lac tonne has already been imported. Lower price in international market and supply constraints in domestic market may result into much higher exports this year.

Corporates have a larger share of imports as compared to millers, informed the source.


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