Government wheat stocks plunge to 9-year-low

The Centre had, on September 23, reduced the import duty on wheat from 25 per cent to 10 per cent.

Written by Harish Damodaran | New Delhi | Published:October 27, 2016 3:37 am
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Wheat inventories in government godowns have dwindled to a nine-year-low of 21.66 million tonnes (mt) as on October 1 and perilously close to the minimum buffer-cum-strategic reserve norm of 20.52 mt for this date.

The precarious public stocks position is, however, counterbalanced by ample global supplies and also the prospect of a bumper wheat crop in the coming rabi season, thanks to the recharged soil moisture conditions from a decent southwest monsoon.

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The Centre had, on September 23, reduced the import duty on wheat from 25 per cent to 10 per cent. The decision was forced by a poor domestic crop in 2015-16, notwithstanding the Centre’s own production figure of 93.5 mt being some 10 mt below the estimates by grain traders and analysts. The lower import duty is also applicable only up to February 29.

Wheat of Ukraine origin is currently being imported at $ 208-210 per tonne cost & freight India, while the corresponding price for Australian premium white grain (the new crop to be shipped from late-November) is $235-240.

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“So far, 2-2.2 mt of imports have been contracted during 2016-17, of which about one mt have arrived. Given the narrow window for imports at 10 per cent duty and three weeks’ voyage time from Ukraine, I don’t expect more than 2.5-3 mt to land this fiscal,” said Amit Takkar, managing director of Conifer Commodities Pvt. Ltd, a Gurgaon-based grain trading consultancy.

The Centre, he pointed out, may not want to encourage wheat imports beyond a point, especially keeping in view Assembly elections in Punjab and Uttar Pradesh early next year. There would also be the temptation to hike the minimum support price (MSP) of wheat significantly ahead of the polls.

At Rs 1,525 per quintal ($ 228/tonne), the current MSP payable to farmers at mandis is already way higher than the landed cost of Ukrainian wheat at Indian ports. A mere 10 per cent import duty will obviously not be enough to sustain a higher MSP.

There are indications of the latter being raised to Rs 1,625 per quintal for the 2016-17 season.

The announcement of the MSP — not only for wheat, but also other rabi crops like rapeseed-mustard, chana (chickpea) and masur (lentil) — is expected anytime soon.