In a bid to curb imports and promote sale of excess wheat stocks with government agencies in the open market, the food ministry has proposed a hike in import duty on wheat from 10% to 25%.
Sources told FE that after consultation with finance ministry, the food ministry has moved a proposal for increasing import duty on wheat. The issue would be taken up for discussion on Thursday with the revenue department.
Officials said that the proposed move was to curb imports and liquidate poor quality grain procured by the Food Corporation of India (FCI) and state agencies under relaxed quality standards.
In August, the government had imposed 10% import duty on wheat till March 2016. The duty was imposed for the first time since 2006 after private flour millers and food companies mostly from Tamil Nadu started to import wheat from Australia because of physical proximity and comparative price factor. The government had stated that the measure to impose import duty would result in revenue of R90 crore in the remaining part of the current fiscal.
“More than five lakh tonne of wheat has been imported mostly from Australia. More imports are likely to take place from Russia which would hit our sale of excess wheat stocks in the open market,” an official said. This is biggest ever wheat import since 2010 when the country had imported two lakh tonne of grain. In 2014 – 15, the country had imported only around 29,000 tonne of wheat.
Export prices of Australian wheat are ruling in the range of $260-$270 per tonne, making the grain cheaper than locally available grain, making it attractive for the flour millers in southern India.
According to ministry of consumer affairs data, the retail prices of wheat on Tuesday was reported at R32 per kg and Rs 19 per kg in Chennai and Delhi, respectively
Trade sources said un-seasonal rains on the wheat crop earlier this year had adversely affected the quality of the grain. The state owned– FCI has huge wheat stocks — in excess of 34.4 million tonne — on September 1 which far exceeds buffer norms of 20 mt for October 1.
The central government is keen to sell off the wheat on a priority basis, which was procured under the relaxed quality norms, through public distribution system and through Open Market Sale Scheme (OMSS).
Only around 8 lakh tonne of wheat had been sold under OMSS to private purchasers. FCI requires around 20 to 22 mt of wheat annually for distribution through Public Distribution System (PDS).
“We have around 8–10 million tonne of excess wheat stocks,” the official said.
The country’s wheat production is estimated to have declined to 88.94 mt in the 2014-15 crop year, as against the record production of 95.85 mt in 2013-14.