India Is Opening Up Its Wheat Market to Imports After 5 Years
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The Wheat prices in India surged to a six-month high due to limited supplies and high demand ahead of the festival season. The price surge may push the already high inflation, which the central government and RBI have been trying to contain for over a year.
A New Delhi-based trader told the international news agency that in all key producing states, farmer supplies have nearly come to a halt. “Flour mills are struggling to obtain sufficient supplies in the market.”
Wheat prices in Indore, the report said, rose by 1.5 percent on Tuesday to Rs 25,446 per metric ton, the highest since February 10. Prices have surged by nearly 18 percent over the past four months. A Mumbai-based dealer said the government should release stocks from its warehouses into the open market to avoid potential shortages during the festive season.
As of August 1, Wheat stocks in government warehouses stood at 28.3 million metric tons, an increase from the 26.6 million metric tons recorded a year earlier. “Imports are necessary to lower prices. The government cannot increase supplies without imports,” the dealer said.
Food Secretary Sanjeev Chopra said the government was considering a proposal to cut or abolish a 40 percent import tax on Wheat. He also said there was no plan to import Wheat from Russia or engage in a government-to-government deal. According to the AgFlow data, India imported 50,000 tons of Wheat from Romania in July-Aug 2023, followed by Australia (17,000 tons).
Russia has indicated its willingness to offer a discount on prevailing market prices. There are no restrictions on the export of food commodities from Russia,” an official told Reuters. “India can easily secure a discount of $25 to $40 per ton from Russia. This will ensure that the landed cost of Wheat remains significantly below local prices,” said a dealer based in Mumbai with a global trade house.
In recent months, Wheat prices in the national capital have increased 12 percent, reaching a six-month high of Rs 25,174 per metric ton. This price hike is attributed to erratic weather conditions like unseasonal rain and heatwaves that adversely affected production. The Wheat production was higher in 2023 than last year but lower than the estimates.
The central government in June imposed a limit on the amount of Wheat stocks traders can hold. It also said that 15 lakh metric tons of Wheat would be offloaded in the first phase from central pool stock to flour mills, private traders, and bulk buyers to control retail prices.
The Ministry of Consumer Affairs in June said that to manage overall food security and to prevent hoarding and unscrupulous speculation, the government had decided to impose stock limits on the Wheat.
The Indian government has decided to allow Wheat imports as the commodity prices have risen to a month high due to increasing demand and supply shortage. Further, imports will also be allowed through the country’s southern ports, and the Customs duty has been lowered, which could be either zero or 15 percent. The Wheat consignments are expected to arrive at Thoothukudi, Kochi, and Krishnapatnam ports. The government will ensure that the imported commodity will not be used for seed purposes.
Currently, 44 percent of Customs duty is imposed on Wheat imports. There is also a proposal to allow importers to supply Wheat to the Food Corporation of India, and they may be given a duty waiver. India is opening its Wheat market to imports after five years, when high-quality Wheat, mainly from Australia, was shipped into the country.
Wheat Output in India
Wheat output rose to a record 112.74 million metric tons in 2023, up from 107.7 million metric tons a year earlier, according to the Ministry of Agriculture & Farmers Welfare. The country consumes around 108 million metric tons of Wheat annually. However, a leading trade body told the news agency that the country’s Wheat harvest 2023 was at least 10 percent lower than the farm ministry’s estimate.
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