Govt may take a call on exporting wheat from central pool next month

Officials said the ministry is open to exporting 0.5-1.0 mt of wheat from state-run warehouses

The Union food ministry is expected to take a final call on whether or not to export wheat from the central pool after the first week of February, when the situation on domestic sales becomes clearer.

Officials said the ministry was open to exporting 0.5-1.0 million tonnes from state-run warehouses. This is to clear inventories ahead of the new procurement season that starts from April 1 and to take advantage of a benign international market. However, it  would like to first ensure the domestic market does not have any more appetite left for wheat. “We are analysing sale in  local markets, as there has been a slight pick up in the past few weeks, with traders showing renewed interest. We could also consider the option of exporting wheat if domestic sales do not push up,” a senior food ministry official said.

He said the department will prepare a formal note after the first week of February on this issue. This would be considered by a committee of secretaries, recently constituted by the government.

The committee, comprising secretaries from the departments of food, commerce and finance, was constituted a few weeks earlier to take a quick decision on liquidating foodgrain stocks from the central pool.

These stocks as on January 1 were estimated at 36.85 mt, as against the requirement of 25 mt, almost 47 per cent more.

Of this, wheat were estimated to be 25.1 mt as against the 11.2 mt. Rice were estimated to be 11.7 mt as against a requirement of 13.8 mt. These do not include 16.9 million of unmilled paddy with  millers.

The government needs to clear space for the new wheat crop, expected to start arriving from April. Else, much of the existing crop will have to be kept in the open, leading to damage. Wheat output in the 2015 crop season is expected to be around 100 mt, despite a fall in acreage due to favourable weather conditions.

 In April 2014, India last exported around 300,000 tonne of wheat from central stocks. Since then it has only been offloading its stocks in the domestic market as international prices were not good.
 

It had planned to sell around 5 million tonne of wheat in the domestic market in 2014-15, of which just around 2.5 million tonne could be offloaded due to low demand.  

Since late December, international wheat prices have risen to around $280 per tonne before settling at around $260-265 per tonne because of a proposed export tax by Russia, the world's largest exporter of wheat, and unfavourable weather in some other regions. This has raised hopes that India, which is sitting on a huge stocks of wheat, could restart its exports.

However, despite the favourable international market, private grain traders are of the opinion that high procurement cost and long transportation charges to the ports make the sales uncompetitive for them. 

“For the government though, it is different as much of its cost is borne by the exchequer, but here too it will be very difficult for it to export at a loss,” a senior official from a leading international grain trading firm said.