Stung by slow domestic wheat purchases, India on Monday took its first step towards importing the grain for the second year in a row, directing a state agency to begin work on one million tonnes of overseas purchases.
A senior government official had earlier said that the State Trading Corp. (STC) was likely to issue a tender “today or tomorrow” for the import of one million tonnes of wheat.
“The government has decided that action may be initiated by STC for import of one million tonnes of wheat in suitable tranches by July 2007, since there can be no compromise on food security,” minister of state for food, Akhilesh Prasad Singh said.
Tender details, including when and where the grain would arrive, were still being worked out, the official, who did not wish to be named, had said.
Procurement problems: Officials say farmers have been holding back stocks in the hope of reaping higher prices in the coming months
Agriculture minister Sharad Pawar had announced last month that the government could buy three lakh tonnes of wheat in 2007 if there were local shortages.
India, the world’s second-largest wheat producer, was forced to order expensive imports totalling 5.5 million tonnes (mt) in 2006 after a poor crop, with each subsequent contract pushing up international prices.
The country is likely to produce 73.7mt of wheat in 2007, up from 69.4mt in 2006, according to forecasts. But despite prospects of a big crop, grain purchases by the Food Corp. of India and other government agencies have been low.
Until last week, procurement was estimated at 7.4mt against a target of 15 million.
The government buys wheat from farmers at a fixed price to build buffer stocks and run welfare schemes.
But officials say farmers have been holding back stocks in the hope of reaping higher prices in the coming months.
On Friday, India said it would attempt to hedge against possibly expensive grain imports this year, by asking firms to agree to prices in advance in return for a non-refundable premium.
Bids would contain a call option, which gives a buyer the right to purchase a commodity at a specified price within a specific time period.
Last week, flour millers said about 2,500 tonnes of wheat had reached Indian shores from Pakistan and the consignments had been sent to be tested for quality.
The wheat, which arrived at the southern Indian port of Tuticorin, was bought at $232 a tonne on a cost and freight basis, a flour millers’ federation official said. Indian grain traders have contracted to import 20,000 tonnes of Pakistani wheat, Vijay Iyengar, managing director of Agrocorp International Pte. Ltd, said. But traders said up to 1.5 lakh tonnes of Pakistani wheat may be imported.