Govt yet to give details of wheat, sugar imports

NEW DELHI: Ships bearing food for India will start arriving only after a few months. The government’s attempt to cool food prices is unlikely to make any difference to consumer budgets for some time.

As the Cabinet has not specified the contours of wheat and sugar imports, it will take another round of decision-making by commerce, food and finance ministries before India starts booking contracts in the world markets.

The Cabinet has also permitted import of another 1 mt wheat for ration shops. But the time taken in bringing it to the market will eat into the affordability of essential commodities.

All the concerned ministries are still waiting for minutes of the Cabinet Committee of Prices meeting held last week. No action can be taken till they are received. More importantly, there are several policy issues involved.

Meanwhile, commodity traders are in panic after rumours of impending stock control limits and a change in trading rules circulated in the market on Saturday. Grains and pulses hit the lower circuit on Ncdex and MCX as traders remained unclear on the future direction of government policy.

There are several issues that need to be clarified before markets become stable again. The new duty on wheat is still not certain. The food ministry has still not got any formal proposal on the table on what the new duty should be. Under the current Exim policy, 0% duty wheat imports are canalised only through FCI .

So either the government will have to amend the Exim policy to allow industrial users start importing wheat or create a mechanism to bypass this hurdle. Consequently, it will need concerted action by all three ministries before a notification is actually issued.

The nod for another 1mt wheat import by FCI for PDS has largely gone unnoticed because the government is still struggling to find quantities for the previous tenders of 3.5mt. In FCI’s third tender last week of 2.2mt, it received bids for only 1.5 mt.

Bidders can possibly raise that to reach 1.9 mt. Only after this tender is finally contracted and awarded, will the FCI issue a fourth tender for the remaining 1.3mt. In other words, it will be well into July before the tendering process is complete. By then, world wheat prices would also have notched up.

Getting the wheat physically in, however, will take even longer. With the monsoon here and perennial port congestion, it will be a humongous task to ensure that the wheat starts reaching consumers before September-October.

Trade analysts are also concerned about the shortage of vessels to bring the grain into India, given FCI’s tender specifications. Similarly, import of sugar under TRQ cannot begin until the commerce ministry notifies the duty and quantities permitted.

Moreover, the ban on sugar exports is only for the current sugar marketing year. So release orders for exports will not be given till October 1, ’06. After that the new production will start. So any import of raw sugar by traders under TRQ will depend not just on the duty decided by the DGFT but the price differential between local and high world prices.