Wheat import can wait till October

NEW DELHI: The government is unclear whether it will have the requisite four million tonnes of grain as buffer stock by the end of the year through imports. However, it is certain on one thing—rising inflation is to be kept at bay at all costs and imports are still the most economically viable option to bridge the wheat procurement shortfall. All the more so if the consumer is to remain king.

That could mean waiting until after October when Australian wheat hits the global market and imports bring prices crashing down noticeably in the domestic market. It could also mean considering the possibility of distributing limited quantities of pulses and edible oils at subsidised price to BPL families through the public distribution scheme (PDS), even at the cost of an estimated Rs 10,000 crore to the exchequer. The suggestion was made recently by a committee of secretaries, but the government is yet to take a call, although the demand was made by the UPA’s biggest supporter—the Left party combine. Kerala and Tamil Nadu are already supplying limited quantities of subsidised pulses and edible oils to BPL consumers.

The way Union agriculture and food minister Sharad Pawar sees it—the need to balance the concerns of the consumer over high wheat price—is as important as procurement concerns. ”If we bought from the open market at the prevailing high prices, it would mean that every one would hoard. The farmer would too. And we would have proactively pushed up prices artificially for the consumer. That’s completely out of the question,” government sources asserted.

In effect, this is the thinking—at the end of the year, the government has to have a buffer stock of four million tonnes of wheat, and where it gets it from is immaterial as long as the prices are economical compared to the domestic procurement of wheat in the event of a shortfall.

The food ministry still finds it economical to import wheat at $270 per tonne as compared to buying it in the domestic market at open market prices. However, sources point out that, in view of the strengthening of the rupee although, on the face of it, the price is quite high compared to the wieghted average of $205 odd per tonne paid in 2006 for 5.5 million tonnes of wheat import. The prices quoted by the firms that participated in the STC’s one million tonne import tender recently ranged from $265-303 per tonne.

The fear of rising inflation persisting even up to April next year, in fact, has meant that the government has chosen to keep its options open on import of five million tonnes of wheat, way over its actual PDS and welfare needs for the year. All these concerns have meant that FCI is reconsidering the need to buy the entire one million tonne of wheat offered for its current tender. Instead, it may choose to buy only some of it for now and wait, instead, for the EU and Australian wheat to bring global prices down by July-September before issuing more tenders.