Govt to liberalise wheat and sugar import to curb inflation

NEW DELHI: In an aggressive bid to check the rising prices of essential commodities, the government on Thursday decided to liberalise import of wheat and sugar through the private sector in a strictly time-bound manner, besides placing a blanket (also time-bound) ban on export of pulses and sugar.

The relevant notifications on export bans for pulses and sugar are expected to be issued latest by Friday by the DGFT. The ban on export of pulses — already on OGL, will be in force at least up to Diwali.

Import liberalisation for wheat and sugar with zero-import duty, though, will be strictly time-bound, keeping in mind the beginning of the new wheat and sugar season.

On the latter particularly, a bumper cane output is expected in the ‘06-07 season and the government is loath to risk a glut situation disadvantaging farmers. Current commitments on sugar exports by ISEC, STC, etc will be cleared on a strictly monitored basis but no new commitments will be honoured.

Briefing the media after a meeting of the Cabinet Committee on Prices (CCP) that took these decisions on Thursday, finance minister P Chidambaram said the Cabinet felt these three items were prime articles showing a rising trend, so efforts were made to ease their supply situation. “Wheat, pulses and sugar are driving prices up.

Therefore, the decision has been taken to augment the supply side. We are confident that these decisions would dampen inflationary pressures and restore stability in the market,” he said. He also said the government had directed the Cabinet secretary to look into the regulation of the commodity market with assistance from experts to check hoarding.

Mr Chidambaram and food minister Sharad Pawar later decided that imports of 1m tonne up to end September ‘06 would be allowed at zero import tariff, keeping the CVD intact. The earlier proposal on Tariff Rate Quota imports for sugar had suggested that the import tariff be brought down to 20% from the current 60%, even while keeping the CVD of Rs 850 intact.

“There will be no exports until the next season,” Mr Pawar said. He said the shutter on zero tariff imports would go down sharply by September-end, as the ‘06-07 sugar season may produce a record 220 lakh tonne of sugar, while checking prices for now.

But the industry has contended that given the tight global supply situation, even zero duty will not stop prices from going up to Rs 31 per kg or so.

On wheat imports, Mr Pawar said pressure from flour millers and biscuit manufacturers had forced the issue despite a poor response for STC’s global tenders for 6m tonnes in the private sector.

The private sector will now be allowed to import at zero tariff (same terms as the STC) for its use but only within a timeframe that will extend well before the next Rabi season around February-March ‘07.

The government expects that this will bring down prices to around Rs 9-10/kg compared to the current Rs 12 and higher per kg. Denying that this could affect farmers adversely, Mr Pawar said “This is the season when the farmers have got the best price for their wheat, but, I can’t ignore the demands of the PDS.”

Meanwhile, trade sources maintained that the decision on the wheat front, long overdue, was good news for the private sector particularly since wheat prices in the global market had come down by $7 per tonne since February when the STC floated the first global tender for half a million tonnes of wheat imports.

Plus, wheat is loaded on ships and at ports, in some cases. ”The government’s business is to govern, not to trade.,” trade expert Madan Diwan told ET. Wheat importers are optimistic that they will be able to import close to 9-10m tonnes of wheat at economic rates before the zero tariff shutter comes down by February ‘07.