Import Duty Limits Downside In Wheat Prices

NEW DELHI (Commoditiescontrol) – On Tuesday, the junior finance minister, Arjun Meghwal informed Lok Sabha that the notification dated March 17, 2012 had further been amended to impose basic customs duty of 10 percent on wheat and tur with immediate effect.

Currently, prices of both commodities are ruling below the minimum support prices fixed by the Centre at Rs. 1,625/100kg for wheat and Rs. 5,050/100kg for tur mostly in the markets of major producing belts.

The government has taken this decision, apparently, in a move to protect interest of the farmers and it appears that market prices will gain support after imposition of import duty as prices of tur and wheat are up since Tuesday.

However, some of the market men are of the opinion that it will bring a little impact in the case of wheat. They have pointed out that Indian buyers had sourced huge quantity of wheat last year after the government reduced import duty from 25 percent to 10 percent on September 23, 2016 which was applicable till February 2017 but on December 8, 2016 finally it was reduced to zero to boost domestic availability of grain and keep prices under control. According to them, import duty should be 20-25 percent on wheat.

India imported over 55 lakh tonnes of wheat in the marketing season 2016-17 (April-March) and most of the imported wheat was consumed in port towns only. Imported wheat is available presently at Rs. 1,750/100kg from Ukraine origin while French wheat costs Rs. 1,880/100kg (without import duty) while Bangalore based flour millers are sourcing wheat from Madhya Pradesh at Rs. 1,920/100kg. Hence, imported grain will be now more costlier than domestic crop, obviously, duty will restrict imports and lift wholesale prices of wheat in the domestic market, said M K Duttaraj, Former President, Roller Flour Mills Federation of India.

According to him, the quality of grain grown in Madhya Pradesh and Rajasthan is much better than wheat imported from Black sea and France, therefore, south Indian buyers will prefer to source wheat from both states.

"If import duty was not slapped, wheat prices would fall much below the MSP, but it has now limited the downside prices," he added.

As far as quality of the commodity is concerned, definitely, domestic crop is better which will attract buyers from south India but miller will buy better grade of grain for mixing purposes only, said some of the traders in Madhya Pradesh.

"With strengthening of rupee against US dollar, after acceleration in the economic reform programmes initiated by Prime Minister Narendra Modi, India’ imports of grains will be cheaper and flour millers located in the port town will prefer sourcing wheat from overseas rather than buying domestic crop from Madhya Pradesh, Rajasthan, Uttar Pradesh and any other north Indian markets as it will be costlier for them, said Manoharlal Khandelwal, a Bhopal based trader.


Ashok Sah, a Shahjehanpur based trader also believe that import duty should be at least 20-25 percent which would restrict supplies of wheat from overseas and prop up market prices. According to him, duty has limited downside presently but prices are likely to remain under pressure in Uttar Pradesh.

Wheat harvest has begun in almost all parts of the country and it will gather pace April 15, 2017 when arrivals of new crop will swell. New crop has already hit the markets of Madhya Pradesh, Gujarat and Rajasthan and few places in Uttar Pradesh and Bihar. The government has already started buying wheat at MSP in Madhya Pradesh, Gujarat and Rajasthan and procurement will also start in Uttar Pradesh, Punjab, Haryana and elsewhere from April 1, 2017. The Centre has set a target of 330 tonnes of wheat to be procured in the current rabi marketing season 2017-18, however, target may change as the state government of Uttar Pradesh has raised its figure from 30 lakh tonnes to 80 lakh tonnes.

Last year, the Food Corporation of India along with the state agencies could procure only 229 lakh tonnes of wheat while target was 300 lakh tonnes.

Wheat production is estimated at 966.4 lakh tonnes in the country this crop year 2016-17 (July-June) against 922.9 lakh tonnes a corresponding year-ago, as per the second advance estimates released by the Union Agriculture Ministry. India’s highest production of wheat was in 2013-14 at 958.5 lakh tonnes after which the country faced droughts for two consecutive years which affected the crops and wheat output held at 865.3 lakh tonnes in 2014-15, hence, buffer stocks declined considerably to 94.29 lakh tonnes in March 2017 against 168.65 lakh tonnes in the corresponding month last year.

As per the stocking norms, wheat stock should be at least 74.6 lakh tonnes as on April 1 in the central pool. Since, stocks fell near to critical level so Food Corporation of India (FCI) stopped offloading of wheat through Open Market Sales Schemes (OMSS) early this month. FCI sold over 45.67 lakh tonnes of wheat through OMSS in the marketing season 2016-17 (April-March).

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(By Commoditiescontrol Bureau; +91-22-40015533)