The Hindu Business Line : Traders begin limited wheat buy for exports

THE uncertainty over operationalising the Government's new foodgrains export policy notwithstanding, most of the country's leading grain traders are going ahead with making limited purchases of the new wheat crop scheduled to arrive in the markets from mid-April.

"Almost two months have passed since the new policy was announced, but the Commerce Ministry is yet to come out with the operational guidelines regarding the extent of re-imbursement of costs to be made to exporters and the necessary documentation procedures to be followed. "Under the circumstances, the only option available before us is to undertake procurement on a limited scale in the hope that the guidelines would be notified in due course," said Mr D.P. Singh, Managing Director of Sara International Ltd.

Besides Sara, Adani Exports, Cargill, Allanasons Ltd and the state-owned Projects and Equipment Corporation of India (PEC) are also understood to be going ahead with procuring small quantities ranging from 25,000 tonnes to 40,000 tonnes each.

"Since the Government itself is not seemingly in any hurry to introduce the new scheme, it does not make sense to plan purchases beyond these quantities. There is too much of a risk in contracting large-scale purchase in the vague anticipation that at some point, the guidelines for re-imbursement would be notified," Mr Atul Chaturvedi, President (Agro), Adani Exports Ltd, pointed out.

The new export policy envisages exporters undertaking direct grain purchases from the mandis and claiming re-imbursement of freight, port handling (`fobbing') and other expenses permitted under the World Trade Organisation's (WTO) rules. The re-imbursement, in turn, is subject to their exporting the grain and furnishing the supporting documents in this regard.

This is against the existing arrangement, where exporters source their grains entirely from the Food Corporation of India's stocks. While the new policy is largely the Commerce Ministry's brainchild, its actual implementation has, however, hit a roadblock due to concerns over `food security' apparently voiced by the Food Ministry.

With total foodgrain stocks in the Central pool touching a five-year-low, as on February 1, and prices of most agri-commodities, including edible oils, sugar, cotton and dairy products, on a roll, the Government is seen to have suddenly developed cold-feet over allowing exports.

"We do not expect anything of consequence to be announced before the end of elections," noted Mr Chaturvedi.

But that, according to Mr K.C. Mehta of Allanasons Ltd, may be too late. "Currently, Indian wheat is fetching a price of $165-$170 per tonne free-on-board (f.o.b.), which will certainly fall once the new crop from Ukraine and Western Europe enters the market from June-July. If the Government really wants to promote exports, there is no further time to be lost," he added.

The exporters also sought to downplay `food security' concerns by pointing out that although public stocks had fallen to about 24 million tonnes (m.t.), they were way above the normative minimum buffer of 16.8 m.t. for January 1. Moreover, the country is set to harvest 76.12 m.t. of wheat this year, as against 65.10 m.t. during 2002-03.

"If the Government is worried about domestic availability, it could restrict the re-imbursement scheme to exports of up to say, 3-4 m.t.," Mr Singh said.

Taking the minimum support price of Rs 6,300 per tonne declared for the 2004-05 rabi marketing season (April-June) and adding to this, 10 per cent procurement incidentals (mandi cess, commission agent fee, purchase tax and other local levies), cost of gunny bag and labour (Rs 250), freight from Punjab to Kandla or Mundra ports (Rs 1,000), fobbing charges (including interest) of Rs 350, the total cost of wheat to be shipped without re-imbursement would work out to about Rs 8,500 per tonne or $185-$190 per tonne f.o.b. This is as against the current realisation of $165-$170 per tonne.

"We are looking at a re-imbursement of about Rs 1,000 per tonne, which will sufficiently cover our needs," Mr Singh added.

More Stories on : Exports & Imports | Agricultural Policy | Wheat

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