The Centre’s decision to allow duty-free wheat imports, just when sowing of the new crop is on, has left red faces in the Union Agriculture Ministry.
The Ministry has been consistently maintaining that India had produced a bumper wheat crop in 2015-16. In its last estimate, released on August 2, Krishi Bhawan had pegged the output at 93.50 million tonnes (mt), up from 86.53 mt in 2014-15. This was despite government agencies procuring only 22.96 mt of wheat in the last rabi marketing season (April-June), as against 28.08 mt from the previous year’s crop.
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The Agriculture Ministry’s higher production estimates — disputed by the private trade, which pegged it much lower at 80-85 mt in a drought year, aggravated by high temperatures and no winter rain — had led the Centre to raise the import duty on wheat from 10 to 25 per cent. The enhanced duty was first made applicable until March 31, 2016 and then extended up to June 30.
On June 17, the Central Board of Excise and Customs (CBEC) issued a notification continuing with the 25 per cent duty “beyond 30.06.2016 and without an end date”.
But in the last couple of months, the dominant view within the Centre has seemingly shifted away from the Agriculture Ministry’s assessment of wheat crop availability. On September 23, the import duty was suddenly slashed to 10 per cent, to be effective until February 29, 2017 (the new crop’s arrivals start in March).
In the latest CBEC notification, dated December 8, imports have been made totally duty-free — and that, too, “without an end date”. This decision has come even as the Agriculture Ministry has reported higher wheat sowings this year, on the back of improved soil and subsoil moisture conditions from good monsoon rains and the timely onset of winter conducive to germination.
Farmers, as on December 9, had planted 225.63 lakh hectares (lh) area under wheat, compared to 202.28 lh during the same period last year.
“We have no role in the decision (to permit zero duty imports). The Consumer Affairs and Food, Commerce and Finance ministries are the ones that have pushed it, saying this was necessary because of domestic prices flaring up”, a top Agriculture Ministry official, who did not wish to be identified, told The Indian Express.
According to Department of Consumer Affairs data, wheat is now retailing at Rs 24 per kg in Delhi, up Rs 4 from this time three months ago. This has been linked mainly to the Food Corporation of India’s precarious stocks position. These, at 16.50 mt as on December 1, were not just below the 26.88 mt level a year back, but also the lowest for this date since 2007.
“Our focus is production and farmers. The other ministries, especially Consumer Affairs and Food, are more concerned about rising market prices. They feel imports are required, especially given low government wheat stocks that may encourage hoarding and speculation”, the official added.
While duty-free imports can help put a lid on prices ahead of crucial Assembly elections, the decision may also be used by the Opposition to portray the ruling BJP-led alliance as “anti-farmer”: Uttar Pradesh and Punjab, both going to polls early next year, also happen to be the country’s top two wheat-producing states.
Wheat of Black Sea origin (Ukraine and Russia) is currently landing in Indian ports at $210-215 per tonne. It is slightly higher, at $ 225-235 per tonne, for Australian wheat. At these rates, imported wheat would work out Rs 50-200 per quintal cheaper than the Centre’s minimum support price of Rs 1,625/quintal payable to Indian farmers.
An estimated 3.5 mt of wheat imports has so been contracted during 2016-17 (April-March), with 2 mt-plus already arriving. “We don’t expect much more to be contracted, as Black Sea ports would be frozen during the winter and not many shipments can happen in the next 2-3 months. Moreover, we aren’t sure whether the government can stick to the duty-free imports decision with elections approaching and our own crop, too, being harvested after March”, a trade source said.
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