India plans to reduce wheat import duty from July in a bid to cool prices

  • The Indian wheat market has been asking the government to relax import norms so that it becomes viable for private traders to resume imports after a gap of six years to cool prices.

Puja Das
Published23 Jun 2024, 06:22 PM IST
India, the second-largest wheat producer worldwide, has an effective 44% duty on wheat imports in place, which is expected to be reduced amid favourable international prices
India, the second-largest wheat producer worldwide, has an effective 44% duty on wheat imports in place, which is expected to be reduced amid favourable international prices

India is set to resume wheat imports by lowering the duty on inbound shipments while also imposing stock limits on the grain, three officials said, in a new attempt to tame prices and boost supplies.

Additionally, the government is planning to kick off open market operations sales.

India, the second-largest wheat producer worldwide, has a 44% duty on wheat imports, imposed six years ago, which effectively stopped shipments of the grain.

Traders have been asking the government to relax import norms so that they can resume imports at a time international prices are low on account of a glut in Russian production.

However, the matter is sensitive for farmers and any duty cuts would have to be mindful of that. 

Read | Centre weighs stock limit on tur, chana to tame prices

“If at all India imports, it is unlikely to be more than 3-4 million tonnes,” said one of the officials cited above.

The government estimates wheat production in the 2024-25 season to be on par with last year at 112.9 million tonnes.

“If duty is reduced, allowing private wheat imports, international wheat will likely reach India via all major south Indian ports from 1 July,” the other official said. 

And this | Cabinet approves increase in MSP of 14 kharif crops for 2024-25 season

Currently, the landed price of wheat at Kochi port in Kerala and Tuticorin port in Tamil Nadu is $280-$290 ( 23,398- 24,233) a tonne and port handling and packaging cost is another 1,500. 

If the 44% duty is abolished, the effective price would be around 25,000 to 26,000 a tonne. Conversions are as per 23 June currency value. 

The domestic price of wheat in key mandis is in the range of 26,980-27,100 per tonne and the minimum support price of wheat is 2,275 per tonne, according to spot traders.

As per data from the consumer affairs ministry, all-India average price of the staple grain on Sunday was 31 a kg, a rise of 6.4% year-on-year and wholesale price was 27,720 per tonne, an increase of 6.6% on year.

Also this | Govt misses wheat procurement target for second consecutive year, procures 26.6 mt—28.7% lower than target

“As per my understanding and discussions at the international grains council meeting last week in London, India might import a million or two tonnes of wheat to soften prices and keep a little extra for food security purposes.  Given the fact that wheat production estimates are at the same level as last year or a million or two less than that, it's better that the government allows private trade to import a couple of million tonnes of wheat by lowering duty,” M.J. Khan, chairman of the Indian Chamber of Food and Agriculture said. 

“Last year production was significantly down by 3.8 million tonnes. Because of this, the government might take an extra cautious approach in terms of wheat. Buffer stocks are sufficient and above the reserve requirement; but to soften prices and as an extra precautionary measure, there's a possibility of a couple of million tonnes of wheat being imported.”

As for stock limits, the third official said, “The permitted limit of 3,000 tonnes for wholesalers, 10 tonnes for retailers, 10 tonnes for each outlet and 3,000 tonnes at all depots for big chain retailers, 70% of monthly installed capacity multiplied by the remaining months of the current financial year in the case of processors has been proposed."

As per February stock limits, wholesalers were permitted to keep only 500 tonnes, retailers 5 tonnes, big chain retailers 5 tonnes for each outlet and 500 tonnes at all depots, processors 60% of monthly installed capacity multiplied by remaining months till April 2024.

And this | Wheat procurement surpasses last year’s figures, hits 26.3 million tonnes

"Additionally, 2.5 million tonnes of OMSS (open market sale scheme) is initially likely from July or August as per emerging requirements,” the third official said.

The Centre closed wheat procurement at 26.6 million tonnes against last year’s 26.2 million tonnes and the target of 31 million tonnes. After NFSA and other welfare schemes and buffer stock requirement, the government is estimated to have 8.2 million tonnes for OMSS. In the 2023-24 rabi season, the government released about 10.1 million tonnes of wheat under OMSS, the highest ever.

The annual requirement of wheat for NFSA and other welfare schemes is 18.4 million tonnes and closing stock requirement as of 31 March 2025 is 15.7 million tonnes.

All three measures are in the pipeline as prices of wheat generally tend to increase at the procurement season and peak in December-January.

Queries sent on Thursday to the secretaries and spokesperson of the ministry of consumer affairs, food and public distribution remained unanswered at press time.

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First Published:23 Jun 2024, 06:22 PM IST
HomeEconomyIndia plans to reduce wheat import duty from July in a bid to cool prices

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