Wheat import duty waived

The Centre on Thursday waived the import duty on wheat within months of lowering it to 10 per cent as retail prices show little signs of abating.

The duty has been waived for an indefinite period, according to an official notification placed in Parliament on Thursday.

Traders said the move could make Australian wheat cheaper by $23 per tonne and Ukrainian wheat by $10 per tonne, and could push imports up to 6 million tonnes in 2016-17, the highest in nearly 10 years.

The move comes amid uncertainty over the wheat output this year. Despite a rise in area sown, questions are being raised over the condition of the crop, low fertiliser and pesticide use due to and fears of a warm winter.

India’s official wheat output estimate for 2016-17 is 93.50 million tonnes though trade sources reckon production will not be more than 90 million tonnes because of droughts in 2014 and 2015.

Wheat Production

Traders have already contracted imports of 3.5 million tonnes of wheat and arrivals are around 1.8 million tonnes. “Almost 1 million tonnes of wheat can come into the country every month between January and March when Australian wheat arrives in global markets,” a trader with a grain trading company said.

Australian wheat sells for $235 per tonne, CNF, and Ukrainian wheat for $210 per tonne, CNF. 

Experts said with the Centre’s wheat stocks at a nine-year low due to weak procurement, most private traders had little inventories left with them.

The Congress and Janata Dal (United) criticised the duty waiver, saying it would affect farmers. “Wheat is being sold at a very low price after demonetisation. This will affect farmers. It is a big conspiracy,” Congress leader Digvijay Singh said after the notification was tabled in Parliament. 

Meanwhile, wheat futures fell on Thursday following the decision to scrap import duty.

The landed cost of imported wheat is nearly 20 per cent lower than local supplies and the cut could prompt the local bulk consumers to raise overseas purchases in the next few months.

The import duty removal follows local prices hitting a record high last month, and the rupee touching a record low last month, making imports more expensive.

“There will only be a downside of two-three per cent in prices in the near term,” said a trader from central India. “However, prices may go further down after new arrivals next year,” he said.

The January wheat contract settled 2.9 per cent lower at Rs 1,982 ($29.44) per 100 kg.

Retail price of wheat flour in last 1 month