Centre may lower import duty on wheat to combat sharply rising prices

The government could lower import duty on wheat as part of measures to combat the sharply rising prices of the commodity over the past few weeks, say trade and market players.

Though there is no official confirmation on this, market participants expect measures to ensure there is no flare-up in flour rates in the festival season, which starts this month.

India levies an import duty of 40 per cent on wheat.

Liquidating some stocks from the Central pool for private traders and a curb on excess holding could be considered.

However, in the present global conditions, if import duty goes, it won’t be of much help, traders say, because the globally landed price of Indian wheat is around Rs 3,000 per quintal, while the maximum price at which Indian wheat is selling domestically in southern ports is Rs 2,700-2,750 per quintal.

“As of now, it does not make sense to lower the import duty because domestically available wheat is still cheaper than that in global markets, but with Russia and Ukraine agreeing to allow the passage of stored wheat and the US expecting a bumper harvest, global prices might soften, which could bring parity with domestic rates,” a senior industry official said.

He said even if import duty was abolished for the time being, 500,000-1 million tonnes of international wheat would come to India through southern ports like Tuticorin, and that could ease flour prices in those parts of the country.

Sources said a delegation of southern flour millers was scheduled to meet senior food ministry officials over the next few weeks.

Imports, if allowed, will not be big volume-wise, but they could raise questions because it would mean importing the cereal barely months after India was talking of “feeding the world”.

Last week, wheat prices in major markets of the country jumped to a record Rs 23,547 per tonne. That was up nearly 12 per cent from the recent lows after the government’s surprise ban on wheat export on May 14.

The spike was due to rising demand amid dwindling supplies because of a heat wave destroying the crop, news agency Reuters reported.

The Centre had in the past few months calibrated wheat exports to tame prices and ensure that unscrupulous operators did not use the window to export excess flour.

According to the food ministry, India exported around 95,167 tonnes of wheat flour (atta) in April 2022. That was against around 26,000 tonnes in April 2021, a jump of almost 267 per cent.

In FY22, as regards wheat, India exported over 7 million tonnes, a record and worth around $2.12 billion, which was 274 per cent more than in FY21.

In FY23, according to official records, till the ban, around 4.5 million tonnes had been contracted for export. Of this, 1.47 million tonnes was shipped in April.