The Cabinet Committee On Economic Affairs (CCEA) on August 8 allowed the agencies to export 2 million tonne of wheat at a floor price of $300 a tonne the rate was finalised last year as the government sought to trim stocks to ease storage and boost trade earnings by a targetted $600 million this fiscal to cut the current account deficit. However, with higher wheat production forecast for this year and a consequent drop in prices a 21-25% drop in wheat prices in supplies from Russia and Ukraine in the past one year India is losing the advantage it enjoyed last year.
So when the quotes for the first set of tenders were opened on October 4, State Trading Corporation (STC) got the highest bid at $267 per tonne for export of 60,000 tonne of wheat from the west coast (Mundra) while MMTC received the highest bid at $261.25 for export of 60,000 tonne from the east coast (Kakinada). The highest bid received by PEC was $260 per tonne for the shipment of 40,000 tonne of the grain from the west coast. The agencies had floated tenders last month for wheat shipment by mid-November.
"The tenders have been scrapped as bid prices were lower than the government-approved floor price of $300 per tonne. Fresh tenders will be floated only if the government decides to lower the floor rate," a senior government official told FE.
Another source said while the commerce ministry is keen on allowing more exports apart from the current domestic allocation of the grain by lowering the minimum export price from $300 a tonne before the storage crunch escaltes into a crisis, the food ministry is more cautious. He said a floor rate of $260 per tonne still holds good as the rupee has depreciated significantly. Usually, any proposal to reduce the floor rate needs to be endorsed by the CCEA.
Analysts said a decision on the floor price has to be taken at the earliest if the government is serious about exports as rice procurement will pick up pace soon. The country is forecast to have a good production of rice (92.32 million tonnes in the current year through June) and wheat output is expected to be robust as well, thanks to good water reserves following adequate showers this year, putting further pressure on warehouses already brimming with stocks.
Wheat and rice stocks with state-run agencies swelled to nearly 59 million tonne as of September 1, compared with the requirement of almost 27 million tonne.
When the bids were open last week, noted grain trade analysts such as TPS Narang had termed impossible the government's efforts to export wheat at such a high floor price, saying supplies from Russia and Ukraine were available at $230-240 per tonne. narang had added that wheat prices in key global markets could remain flat until December and any pick-up in the rates might be expected from January due to extreme winter conditions in countries such as Russia.
Global wheat prices were ruling high at around $320 per tonne a year earlier, thanks to a lower production in key supplier Russia and a smaller US harvest of corn, which competes with wheat for animal feed, Narang had said.
India became one of the largest wheat exporters in April last year, when it shipped around 4.5 million tonne of the grain at an average price of $311 a tonne and earned around $1.4 billion in revenues.