Economy News

Import duty on wheat may be cut

Govt wary of depleting stocks

The government may reduce import duty on wheat after six years to boost domestic supplies so that it would not have to dip into the stocks much for carrying out market intervention programme.

Sources said the decision to cut import duty on wheat would be taken up only after June, when the current procurement season officially ends, while a smaller quantity of grain is likely to be allowed to be imported.

“We have requested the government to cut import duty on wheat so that domestic supplies could improve without depletion of government stocks,” Dharmendra Jain, vice-president, roller flour millers federation of India, told FE.

Trade sources said that import of around 4-5 MT would help improve domestic supplies while allowing the government agencies to hold on to adequate stock as a buffer.

Wheat prices in Russia are currently ruling $ 284/tonne (around Rs 2357/tonne) against the minimum support price (MSP) of Rs 2275/quintal for the current season. In April, 2019, import duty on wheat was increased to 40% from 30% in April 2019, to boost procurement by agencies.

Food ministry officials said while the government is keeping a close watch on market prices of wheat.

“Compared to last year, we are in a better position and all options for the market intervention programme are open,” a food ministry official said.

The purchase of wheat by government agencies in the current rabi marketing season – 2024-25 (April-June) – has crossed 26.46 million tonnes (MT) on Tuesday, which is marginally higher than total purchase of 26.19 MT in 2023-24 season.

Officials said total purchase of grain is likely to be around 27 MT, adequate to meet requirements for supplies under the Pradhan Mantri Garib Kalyan Anna Yojana and maintain a buffer.

Current wheat stocks in the central pool are 30.18 MT against the buffer of 27.58 MT for July 1.

The food ministry had projected 30-31 MT of wheat purchase in the current season.

“We need around 18.4 MT of grain for social welfare schemes, and any additional procurement in the current season would help us in carrying out open market sales to curb a possible spike in prices,” Ashok Meena, chairman and managing director of FCI, had said.

To curb prices, the government has sold a record 10 MT of wheat in the open market through weekly e-auctions to bulk purchasers and flour millers in FY24.

Retail inflation in wheat rose to 6.02% in April while price rise was 4.74% in March, 2024. Modal retail prices of wheat as per the department of consumer affairs data is currently ruling at Rs 28/kg, which has remained unchanged for the last several months.

The agriculture ministry has projected wheat production in the 2023-24 crop year (July-June) at 112 MT while a private survey had estimated the output at 106 MT.

After achieving a record procurement of 43.3 MT in the 2021-22 season, the purchase by the government agencies under the MSP operations fell to a record low of 18.8 MT in the 2022-23 season. However, it rose by around 40% to 26.2 MT in 2023-24.

The government has announced an MSP of Rs 2,275/quintal for the 2024-25 season, which is an increase of Rs 150/quintal over the previous season. In addition, Rajasthan and Madhya Pradesh have announced a bonus of Rs 125/quintal over the MSP.

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