Import duty on wheat to be scrapped

In April 2019, India raised the import duty on wheat to 40% from 30% as domestic prices had dropped, to discourage cheaper wheat imports.

Import duty on wheat to be scrapped
“There is a need to give a signal to traders that domestic prices of wheat need to be cut,” a senior government official told FE, confirming the plan to scrap the tariff.

To contain soaring domestic wheat prices that may accentuate inflationary pressures, the Centre is likely to scrap the 40% import duty on wheat soon.

“There is a need to give a signal to traders that domestic prices of wheat need to be cut,” a senior government official told FE, confirming the plan to scrap the tariff.

However, a duty cut may not be very effective in the current context to cool local prices as domestic prices are much cheaper than the current global prices. “Domestic prices are around Rs 23-24/kg, the landed cost of imported wheat currently is around Rs 33-34 a kg,” another official said.

Also Read | What India’s U-turn on wheat exports means for world markets – Explained

Although globally there hasn’t been much surplus wheat after the Russia-Ukraine war broke out, there are chances that like in the procurement of cheaper crude petroleum, traders may be facilitated to import cheaper wheat from Russia. The United Nations has also brokered a deal with Russia under which some of the Ukrainian wheat could be evacuated to cool global prices as well.

Besides scrapping import duty, the Centre is also looking at imposing stock holding limits on wheat and voluntary disclosure of wheat stocks held by stockists, traders and millers.

In April 2019, India raised the import duty on wheat to 40% from 30% as domestic prices had dropped, to discourage cheaper wheat imports.

Wheat prices across many mandis witnessed a sharp spike on Wednesday to cross a record `2,300/quintal, due to slower supplies and robust demand. The prices are now 14% above the minimum support price (MSP).

The mandi prices were ruling at around Rs 2,150-Rs 2,175/quintal since the ban on wheat export was imposed on May 14, 2022.

Domestic supplies of wheat have been impacted by lower production because of the heat wave witnessed in March, considered the maturing stage of the crop.

Another factor impacting the prices is that the Food Corporation of India (FCI) would not undertake the open market sale of wheat for lack of sufficient stock due to a sharp fall in procurement this season.

In the rabi marketing season (April-June) for 2022-23, wheat procurement by FCI dropped by more than 56.6% to 18.7 MT against 43.3 MT purchased from the farmers in the previous year. Lower procurement has been attributed to a decline in production.

On July 1, wheat stocks in the central pool stood at 28.5 MT against the buffer norm of 27.5 MT, the lowest since 2008.

According to agriculture ministry data, wheat output in the 2021-22 crop year (July-June) declined by around 3% on year to 106 million tonne (MT) from 109 MT.

According to traders’ estimates, wheat production this year is around 98-99 MT while the US Department of Agriculture’s Foreign Agricultural Service has estimated India’s wheat production at 99 MT.

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