The government on Monday waived the five per cent duty on import of wheat by private traders to ease pressure on bulk consumers. "Biscuit and bread manufacturers were facing problems. They can import wheat at zero-duty now till December," Food and Agriculture Minister Sharad Pawar told the Hindustan Times.
A notification on his announcement, prompted by the gap in demand and supply, will follow soon.
But traders said the move has come too late in the day, as high global prices would prevent big purchases. DP Singh, chairman of the All India Grain Exporters' Association, said the zero-duty regime should have come three months ago when the government reduced duty from 50 per cent to five per cent. Given that international price is currently around US $220 per tonne, Singh does not expect imports by private players this fiscal to exceed 10 lakh tonne.
Though the import duty for private players had been slashed in June, official channelising agency State Trading Corporation (STC) had been exempted from paying it on wheat shipped in for augmenting the buffer stock and to keep the Public Distribution System going.
Pawar's announcement comes a day ahead of the last date for submission and opening of STC's fifth tender for wheat import for 16.7 lakh tonne. The STC has already placed orders for 38.3 lakh tonne this year with suppliers in Australia, Canada, Russia and Ukraine.
The zero-duty concession for private parties is meant to ensure that demand for wheat from biscuit-bread manufacturers and roller-mills does not impact wheat prices that have started showing shown a "stabilising" trend. Besides, it would also help cap input costs for the industry.
The move showed results immediately: wheat prices in the wholesale market dropped between Rs 10 and Rs 20. According to a report of news agency Reuters, wheat prices had risen more than 30 per cent to about Rs 1,050 per tonne from Rs 800 in the past six months.
Akshay Bector, of the Punjab-headquartered Cremica group, was optimistic that the move would help push down price increase.
He wanted a similar relaxation on import of edible oil. "Any reduction in the duty regime will have a positive impact," Bector said.
The decision comes on the heels of official claims that steps to control the prices have shown results. The price of sugar has dropped in the wholesale market, those of pulses and wheat have shown a stabilising trend, consumer affairs secretary L Mansingh said last week after the Cabinet Committee on Prices took stock of the situation.
Officials admit that the arrival of the contracted quantity of wheat had been slow in the initial months. "It has now been streamlined," Mansingh said. Beginning September, the government expects monthly wheat arrivals to cross 5 lakh tonne.
The STC has so far placed an order for 38.3 lakh tonne and invited bids from global suppliers for another 16.7 lakh tonne. The government's assessment is that after the arrival of the entire 55 lakh tonne contracted by it, there will be no need for additional imports till the harvesting period next March.
The government's emphasis on raising the buffer stock level comes from its rather unhappy experience this year; low buffer stocks and a negative market sentiment had made it difficult for the government to meet "temporary" demand-supply imbalance. The result was a price rise that politically exposed the government to attacks from the opposition as well as its Left allies.