India will soon allow duty-free imports of 500,000 T corn - sources

By Mayank Bhardwaj and Rajendra Jadhav

NEW DELHI/MUMBAI (Reuters) - India will soon ask state-run traders to import half a million tonnes of duty-free corn after a second straight drought cut output, in what would be the country's first overseas purchase in 16 years, two government sources said on Thursday.

India has agreed to allow state-run traders such as PEC Ltd to import corn to curb rising prices and avoid shortages, said a government official directly involved in the decision-making process. The official requested anonymity because he is not authorised to talk to the media.

The government will import only non-genetically modified varieties, another government official said.

Trade ministry spokesman Rajinder Choudhury had no immediate comment.

India is traditionally a major corn exporter to southeast Asia, but higher local prices because of the first back-to-back drought in nearly three decades and rising domestic demand have hampered exports.

The country has not struck even a single deal so far in the current fiscal year, after selling 2.8 million tonnes in 2014/15. Local corn prices have jumped 28 percent in the past six months.

The dramatic switch in India's position in the market is likely to bring further cheer to rival suppliers like Brazil, Argentina and the United States.

The country's absence from the export market is already helping rivals grab Asian market share and its imports would give a boost to global prices which have fallen nearly 13 percent in the past six months.

"India's demand will lift corn prices in the world market since everyone counts India as an exporter, not as an importer," said a Mumbai-based dealer with a global trading firm.

LARGE-SCALE SHORTAGES

Trade and industry experts say India is expected to import non-GM corn from Africa or Ukraine.

Government-backed trading companies will sell imported corn directly to poultry units and starch manufacturers.

The landed cost of imported corn would be at least 7 percent lower than local prices, said Prasanna Pedgaonkar, deputy general manager at chicken processor Venky's.

"Due to the production shortfall traders have started hoarding, and imports would discourage hoarding," he said.

The government has forecast this year's output of the summer-sown variety at 15.51 million tonnes, but trade and industry experts estimate production at only 12 to 13 million tonnes because of the drought.

India consumes 19 million tonnes of corn a year.

Indian farmers grow corn twice a year. The summer crop, which accounts for nearly 80 percent of total output, is planted in the rainy months of June-July, with harvests from October. Winter-sown corn will start trickling in by March-April.

"Small poultry farmers are struggling to survive due to rising prices," said Deepak Chawan, an industry analyst based in the western city of Pune. "Imports will help moderate prices until supplies start from the winter-sown crop."

(Editing by Paritosh Bansal and Adrian Croft)