Pawar: Price led to wheat import decision

The agriculture ministry decided to scrap the first tranche of the planned wheat import in April this year to avoid setting a "very high" benchmark price for future wheat imports, Agriculture Minister Sharad Pawar has said.

In a letter to his Cabinet colleagues, Pawar has said the ministry's decision would also help avert possible allegations from farmers that the government shortchanged them.

Pawar said the criticism that the government was importing wheat at prices higher than domestic procurement rates was unfair and allegations by vested interests.

Following a government decision, the STC had floated a tender on April 30 to import one million tonnes of wheat.

After analysing the bids, STC recommended purchase of just 300,000-odd tonnes at $ 263, on the grounds that international prices could drop following a good crop in Russia, France and Germany among others.

Pawar said the officials in the Department of Food and Public Distribution had advised that imported wheat would land at Rs 1103 per quintal -- nearly Rs 253 more than domestic procurement rates. The fear was that prices would have softened later, leaving the government open to criticism to the charge of having bought dear.

In addition, since procurement was to go on till June end, paying Rs 1103 at the same time would have induced farmers and traders to hoard wheat stocks in the hope of a future price rise, also affecting the procurement process that was then underway. This would have also led to an inflationary spiral and affected the domestic price situation.

The Food department was also anxious to prevent setting a new and "very high" benchmark price for future wheat imports, which would have had adverse financial implications.

By May 26, the government had managed to procure 10.6 million tonnes at Rs 850 per quintal. "Had the government decided to import 300,000 tonnes of wheat at $ 263, the procurement of an additional 930,800 tonnes would have been severely curtailed. The savings on account of domestic procurement is estimated at Rs 215 odd crore, Pawar added.

Following a government decision, the STC had floated a tender on April 30 to import 1 million tonnes of wheat. After analysing the bids, STC recommended purchase of just 300,006 tonnes at $ 263, on the grounds that international prices could drop following a good crop in Russia, France and Germany among others.

After the end of domestic procurement, the agriculture ministry again decided to import wheat to augment public stock. Once again, STC floated a tender and recommended purchase of around 500,000 tonnes at an average weighted price of $ 325.59. "This decision" Pawar says "was taken after discussion at "appropriate levels in government". "A conscious decision was taken to import to augment domestic supplies and keep prices under control."

Subsequently, the government asked STC to float yet another tender for import, following reports that some major wheat producing countries were likely to restrict exports. To preempt this, STC offered to import and supply around 790,000 tonnes at a price of nearly $ 390.

This was endorsed by the Empowered Group of Ministers, Pawar said, adding that the decision to import wheat to meet "food security concerns" of India and "ensure weaker sections are insulated from pressures of food price inflation".