To protect public from price rise, Narendra Modi govt abolishes wheat import duty

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New Delhi | Updated: December 9, 2016 3:48:04 PM

To improve the supply of wheat, the government on Thursday removed a 10% import duty on the grain. Earlier, in September, the wheat import duty was brought down to 10% from 20%.

Around 2 million tonne (mt) of wheat from Ukraine and Australia has been imported by private players in the current financial year.Around 2 million tonne (mt) of wheat from Ukraine and Australia has been imported by private players in the current financial year.

To improve the supply of wheat, the government on Thursday removed a 10% import duty on the grain. Earlier, in September, the wheat import duty was brought down to 10% from 20%. Sources told FE that the move is aimed at ensuring that retail wheat prices, which have seen an increase in the last few weeks, are kept under check till the new crop arrives in the market from April 1, 2017.

Around 2 million tonne (mt) of wheat from Ukraine and Australia has been imported by private players in the current financial year. Traders say that with the abolition of import duty, another 3 mt of wheat is expected to be imported in the current financial year. Traders say that currently, the global price of wheat is around $ 235 per tonne, which is below the domestic prices. However, the government is expected to review the import duty structure by March or April, 2017, once the new crop would start arriving in the market.

It’s noteworthy that the government has abolished the import duty despite higher domestic production of 93.50 mt in the 2015-16 crop year (July-June) compared with 86 mt reported in the previous year. Traders disagree with the wheat output figure put out by the agriculture ministry, stating that the actual grain output in 2015-16 was around 88–90 mt. Terming the the government’s decision to abolish wheat import duty as ‘wrong’, Ajay Vir Jhakar, chairman, Bharat Krishak Samaj, said the move would benefit only international commodity firms while adversely impacting farmers in Punjab and Haryana. “The government has stated that wheat sowing is more than last year and even previous years’ average sowing in spite of demonetisation. Imports are counter-productive to the Make in India campaign,” Jhakar said.

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Recently, the food ministry had proposed the cut in wheat import duty as the procurement by government-owned agencies like Food Corporation of India (FCI) from farmers during the rabi marketing season (2016-17) had dropped sharply to 23 mt this year, from 28 mt reported last year. “We had recommended long back to bring down the import duty on wheat. The move should increase local supplies and curb price rise,” an official said. The retails prices of wheat has seen an increase in all major cities across the country in the last couple of weeks.

With a depletion in wheat stocks, FCI has put restrictions on sale of wheat under the Open Market Sale Scheme (OMSS) to bulk buyers. In the current financial year, more than 3.39 mt of wheat has been sold to private bulk purchasers. In FY16, FCI had sold 7.1 mt of wheat through the OMSS, while in 2014-15, the corporation had sold more than 4.2 mt of grain to bulk purchasers. On November 1, FCI had wheat stocks of 18.8 mt while as per the buffer stocks norms, the corporation needs to have a wheat stock of 13.8 mt by January 1, 2017.

“As FCI provides 2 to 2.5 mt of wheat to public distribution system monthly, it leaves out virtually no excess stocks by next month,” a food ministry official said.

Meanwhile, wheat sowing has been continuing across the key growing states — Punjab, Haryana, Rajasthan, UP and Madhya Pradesh. However, there are concerns about the 2016-17 wheat crop against the backdrop of the India Meteorological Department forecasting a warmer winter for this year. Wheat is a rabi, or winter, crop that is sown during November and December. Harvesting starts by middle of March.

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