Costly wheat import grinds Govt in 2007

Costly wheat import grinds Govt in 2007
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First Published: Thu, Dec 27 2007. 01 20 PM IST
Updated: Thu, Dec 27 2007. 01 20 PM IST
New Delhi: Regardless of positives like higher production and stable domestic price, the wheat crop will be remembered this year for the controversy over its import that armed the opposition and Left parties with ammunition to fire at the ruling UPA coalition.
The government, which imported wheat last year after a gap of six years, had to enter the global market again in 2007 to buy the grain despite rise in domestic production.
Faced with the shortfall in procurement by four million tons even as production went up from 69.35 million tons last year to 74.89 million tons in 2007, the government said import was necessary to boost buffer stock to meet any exigencies.
Import has helped to maintain stability in wheat prices in the domestic market, a food ministry official said. Retail prices of wheat flour remained at around Rs12 per kg.
But unlike last year, it was not a smooth affair for the government to undertake imports as wheat prices soared in the global markets. Though the Centre had targeted to import 2.3 million tons in 2007, it bought 1.8 million tons.
Import of wheat at exorbitant price (double than what government was paying to domestic farmers) sparked off a controversy with both the Opposition and Left parties training guns at Agriculture and Food Minister Sharad Pawar, alleging irregularities in the entire tendering process.
The government purchased wheat at Rs850 per quintal from farmers in 2007, while it paid Rs1,600 per quintal to import. The controversy erupted when State Trading Corporation contracted to import 5.11 lakh tons of wheat in July at an average price of $325.59 a tonne through second round of tender. It accentuated when contract for another 8 lakh ton of wheat at $389.45 a tonne was made.
The government came under attack for importing the grain at higher prices and questioned were asked as to why the STC’s first import tender was cancelled although global suppliers were ready to supply 3 lakh tons of wheat at $263 a ton.
The government, which purchased 54.54 lakh tons of wheat at an average price of $204.67 per tonne in 2006, responded to the attack saying the tender was rejected because STC had hinted at “softening of prices” after August.
The Centre argued that it was necessary to import wheat “to ensure that food security is not compromised and to provide adequate foodgrain for the public distribution system and other welfare schemes”.
However, despite its explanation, the government continued to be in the firing line of the opposition and its ally, both outside and inside Parliament.
In a letter to Prime Minister Manmohan Singh, the CPI(M) MP Brinda Karat had questioned the UPA government’s decision to import wheat “at prices much higher than those prevailing in the Indian market” and sought an enquiry. CPI, BJP, JD(U) and Siromani Akali Dal also flayed the wheat import policy.
“The lame excuse given by the government only confirms the existence of vested interest in the play,” BJP spokesman Prakash Javadekar had said.
Unfazed by the criticism, the government went on with its import plan in 2007 and contracted for nearly 5 lakh tons through public sector trading firms MMTC and PEC.
Interestingly, like the first tender STC also had to cancel the last tender of the year citing high prices.
Higher output coupled with import helped in keeping the wheat prices under check that haunted the Centre throughout last year prompting it to ban futures trading of the foodgrain at commodity exchanges in March 2007.
The government has also put a ban on wheat and wheat flour exports for an indefinite period. Initially, it had imposed a ban on wheat exports in February which was valid till December 31, 2007. The proposal of importing wheat flour at zero duty kept millers under threat throughout the year.
Realising the importance of increasing the production to remove its dependency on imports, the government announced a record increase of Rs250 per quintal in minimum support price at Rs1,000 a quintal to encourage farmers to put more area under wheat.
During the year, a National Food Security Mission was also launched that aims to raise wheat production by eight million tons during 11th Plan.
It would be interesting to watch whether government succeeds in procuring sufficient quantity of wheat next year for buffer stock on the back of increased MSP and thus avoid import. India, world’s second largest producer of wheat, hopes to encore the performance of last year in terms of production.
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First Published: Thu, Dec 27 2007. 01 20 PM IST
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