Govt may do away with duty on wheat

NEW DELHI: The Centre may completely remove the customs duty on wheat. A proposal has been mooted to do away with the 5% duty so that private traders and millers can import wheat more cheaply. The government itself imports wheat for ration shops at zero duty.

According to sources, the government proposal to slash the duty has the support of the food ministry and the prime minister’s office (PMO) because they are keen to bring down open market prices.

Wheat prices have been rising consistently in the mandis of the north due to sustained demand from the southern states. This trend has continued despite the government slashing duty from 50% to 5% in July.

However, even at zero duty imported wheat is unlikely to become substantially cheaper. This is because world prices are much higher than local prices. “The benefit would be that more contracts can be signed immediately as the parity between Indian and overseas wheat at zero duty is good,” said a trader.

Meanwhile, MMTC is learnt to be ready with an international tender to be floated shortly on behalf of FCI. The quantities likely to be imported by MMTC are still not known. Once MMTC also enters the world market, it would be the fifth tender floated by the central government PSUs on behalf of the FCI.

The government has further lowered its estimate of the ’06 wheat harvest to 69.5m tonnes from 71.5m tonnes. It shows the government underestimated the shortfall in wheat production.

But private traders say even the current revised estimates may be over-optimistic. “If the crop was 69m tonnes, then coupled with carry forward stocks of 4m tonnes, there would have been no reason for the market to flare up so much. The truth is that the crop is actually much lower, possibly 65m tonnes, which is creating a shortage of grain,” said an analyst.