New Delhi: India may abolish customs duty on wheat flour and float a new tender for grain imports in August, traders said on 2August, but the moves may not dent local prices due to expensive global markets.
In an attempt to build stocks and keep a lid on prices during upcoming religious festivals, when demand peaks, the food ministry has proposed scrapping an existing 30% customs duty on wheat flour, industry officials said.
This would help India to take advantage of surplus milling capacity in countries, such as Sri Lanka and Malaysia.
“It might happen soon, but might not be very beneficial as international prices of wheat are still bullish and higher than domestic prices,” said Vinod Kapoor, an official of the Roller Flour Millers’ Federation of India. This may however, help U.S. wheat to enter India in the form of flour, which does not go through exacting phytosanitary tests that imported grain has to pass.
U.S has criticized India’s wheat import regulations as unrealistic after strict controls on weed presence, fumigation and inspection barred purchases of U.S. grain in recent tenders.
Pramod Kumar, president of the Karnataka Flour Millers Association, said flour was selling at $365 a tonne in southern Indian markets, while imported flour would cost around $375 a tonne, including handling and other charges.
Trade officials said domestic prices of wheat were currently stable but the government might soon float another tender to build stocks ahead of the next harvest.
Kapoor said wheat prices in northern India were around $260 per tonne while in the southern states, which do not produce any wheat, the grain was selling around $300 per tonne. Against this, international prices were around $335 a tonne, free on board, he said.
“I am sure the government might start the tender process for wheat imports in a couple of weeks,” said Kapoor. “Volumes will depend on global prices and availability.”
Farm Minister Sharad Pawar said that the government would continue to import wheat to build stocks. The farm ministry last month revised its 2007 wheat output estimate to 74.89 million tonnes, up from 69.48 million in 2006.
“They might float another tender any time, maybe they will float a tender for 500,000 tonnes every month,” said Kumar. A senior government official said the government could enter the global market in August.
Government last month contracted 511,000 tonnes of wheat imports, against a tender for 1 million tonnes. A government official said the grain would arrive in India in eight shipments, half in August or September, and the other four in the following two months.
“Toepfer will supply wheat of Canadian origin, while Riyaz will supply Russian origin wheat,” he said. Meanwhile, the State Trading Corp. was yet to hear from Cargill, the third global firm supplying wheat.