Wheat exports: FCI rejects traders’ allegation

New Delhi, May 15

THE Food Corporation of India (FCI) on Tuesday rejected traders’ claim that its tender for sale of wheat for exports may be a non-starter, asserting that the terms and conditions were made stringent to keep ‘unscrupulous’ players away and prevent diversion of stocks to domestic market.

"How can it be a non-starter. We have already exported 20 lakh tonne of wheat since November, 2000, through public sector undertakings like State Trading Corporation (STC), Minerals and Metals Trading Corporation and PEC", a senior FCI official said.

Considering the performance during the last six-seven months, the target of exporting 50 lakh tonne of wheat this year would "certainly be achieved", he said.

The official said the terms and conditions for inviting offers have been so designed as to prevent involvement of unscrupulous parties in the process and possible manipulation by them to divert the released wheat to the open market for easy profit as the domestic rate is higher at Rs 7000 per tonne.

For example, he said, a minimum quantity of 50,000 tonne for sale to a party has been stipulated as a measure to ensure that only parties with credibility and sound reputation participate in the process.

Terming FCI’s tender as a "rude shock", leading exporters on Monday said demand of a bank guarantee (BG) based on a differential between open sale price and the price at which stocks are offered, a five per cent security deposit, two per cent earnest money and freight charges would reduce liquidity to non-workable levels.

Justifying the demand for irrevocable BGs, the FCI official said such a provision is necessary in view of the differential price between domestic open sale rate, which is Rs 7000 per tonne, and the price at which stocks are offered for export. Since the stocks are likely to be offered at a much lower price, BGs are required to be furnished in order to prevent diversion of wheat by parties into the domestic open market, he said, adding that "it is intended to act as a safety valve against possible misuse".

Referring to the security deposit, he said the amount is refundable and the provision is essentially directed at guarding against violation of the terms and conditions of the contract by parties. He said all the terms and conditions have been laid down in consultation with the Union ministry of food and public distribution and taking everyone concerned into confidence. (PTI)