NEW DELHI: The government has scrapped the 10 per cent import duty on wheat amid rising domestic prices and concerns of a dip in buffer stocks following two consecutive drought years.
Traders anticipate a pickup in imports of the commodity and global prices to rise 3-5 per cent despite a bumper harvest in Australia, Ukraine and Russia. However, with prices staying firm in India, imports will still be cheaper and help lower prices in the domestic market, they said.
In Lok Sabha on Thursday, Finance Minister Arun Jaitley announced the lowering of import duty on wheat from 10 per cent to nil with immediate effect, without an end date, under section 159 of the Customs Act 1962.
The import duty was reduced to 10 per cent from 25 per cent in September this year. Wheat traders expect imports to touch 5 million tonnes this year.
"Import window still seems to be short but still an additional million tonnes can come in due to this decision of duty waiver," said Rajiv Yadav, vice-president for grains and oilseeds at Noble Natural Resources India, a member of trading company Cofco Agri.
The company expects the decision will help lower domestic wheat prices and keep the food inflation under control. Traders at Delhi’s Lawrence market said they expect the wheat prices to fall from Rs 21.50 per kg to Rs 20 in the next two days.
Around a year ago, wheat was being sold at Rs 17 a kg, they said. Tejinder Narang, former director of state-run trading company PEC, said, "The government should take a call to import wheat or not as it is falling below the buffer norms."
According to industry estimates, India has imported around 2.1 million tonnes of wheat since April. PS Nathan, a commodity broker from Chennai, said 6.5 lakh tonnes of wheat, contracted at $215-240 a tonne is expected to arrive at Indian ports by February 2017.
Further, another 6 lakh tonnes of wheat, contracted at $197-212 a tonne from Ukraine and Russia is due to arrive at the ports in the same time period, he said. Indian wheat is selling for $316-320 a tonne.
Narang said the wheat stock in India’s central pool on December 1, 2015 was 27 million tonnes.
"This year’s data is awaited but I expect it to be 15.5 million tonnes. By the time the new crop comes on April 1, we might have 5.5 million tonnes of wheat stock, 2 million tonnes short of the normal, considering that 2.5-3 million tonnes will be the monthly off take," he said.
The government’s estimate to produce 93.5 million tonnes in 2015-16, an 8 per cent increase over 86.53 million tonnes in 2014-15 is off the mark, Narang said. Market estimates vary between 82 million tonnes and 84 million tonnes, he added.
