The directorate general of foreign trade (DGFT) on Monday warned wheat exporters that it would examine cases for referral to the Central Bureau of Investigation (CBI) and the Economic Offencse Wing (EOW) if they are found to be using back-dated letters of credit (LCs) to illegally get permits for outbound shipment of the grain.
While prohibiting wheat export on May 13 to control spiralling prices, the government had made it clear that supplies that are backed by LCs issued before the ban was announced would to be allowed.
Before referring to the CBI, the DGFT will take action under the Foreign Trade (D&R) Act against unscrupulous elements. It also made a two-step approval process for issuing the export permits and decided to undertake physical verification of all approved LCs.
The crackdown by the DGFT comes, as it feared that many of the LCs, typically bank guarantees, may turn out to be fake.
FE had last week reported that exporters had submitted LCs to seek permits for despatches of over one million tonnes of wheat, way above the initial trade estimate of just about 400,000 tonnes, leading to suspicions of attempts by unscrupulous elements to abuse the LC route. The closer scrutiny also indicates the government is in no hurry to relax the export ban, another source had said.
“In order to plug the loopholes, it has been decided that regional authorities will do a physical verification of all LCs, whether already approved or under process and for that if necessary, help of a professional agency may be taken. While doing physical verification, validation/endorsement by recipient banks may be ensured,” the DGFT said in a trade notice.
Apart from allowing exports that were already backed by LCs, officials have stressed that India would also cater for the genuine need of neighbouring countries and food-deficit nations through government-to-government deals and honour supply commitments already made.
Subsequently, the commerce ministry partially eased the order and permitted despatches of wheat consignments that were either handed over to the Customs authorities for examination or registered in their systems by May 13. This relaxation alone was estimated to facilitate clearance of about 350,000 lakh tonnes of wheat, on top of the initial expectation of LC-backed exports of another 4 lakh tonnes. These will still be about a third of the estimated 2-2.2 million tonnes currently at various ports or in transit. Before the ban was slapped on May 13, about two million tonnes of wheat was already exported this fiscal.