The Hindu Business Line : Scrapping of wheat tender: Transparency needed

Suppliers are upset with the cancellation of the tender and may turn wary in future. In the international market, it is seen as a fishing expedition by India, something that does little to enhance the country’s image.

G. Chandrashekhar

Mumbai, April 22

The tender for wheat floated by National Collateral Management Services (NCMSL) has been scrapped after four multinational suppliers responded. The decision to pass over is attributed to high strike price and high premium quoted by the tender participants.

The prices ranged between the low of $380 and high of $471 a tonne, while the premium was in the $30.0-37.5 a tonne range.

At this rate, India could become a laughing stock of the world, a trader remarked. It is not the first time that a tender was scrapped. It happened last year too; and subsequently the country paid a heavy price for importing wheat.

NCMSL tender

It is unclear what prompted the agency NCMSL to float the tender in the first place when procurement is going on at full swing; and what actually changed in the last three days to force the scrapping of the tender. Because the entire exercise involves public money, the Government is duty bound to ensure openness.

A good deal of secrecy seems to be shrouding the tender process, so much so that it was mentioned even STC on whose behalf the tender is sought to be floated was unaware of the developments.

Some independent observers described the whole development as a ham-handed attempt by India to stay in the market for supplies but without genuine desire to buy.

Call option route

The call option route could turn out to be wasteful exercise if actual wheat output is anywhere close to the Agriculture Ministry’s estimate of 75 million tonnes. Already, the Government has placed a number of roadblocks to prevent the private sector from buying wheat. There are formal and informal impediments.

Despite all this, if Food Corporation of India fails to reach the procurement target of 15 million tonnes, there is a reason to suspect something is seriously wrong with the Government policies and approach to procurement.

Given the current pace of arrivals and FCI purchases, it would make commercial sense to wait until mid-May to review the quantum of arrivals and procurement and then take a decision whether or not to import; and in what quantities.

If a need arises, the Government can make forward purchases for shipment in September and beyond. At least, at this point of time, forward prices are softening in the wake of considerably improved world crop prospects. A close watch on the developments in the world wheat market and within the country is necessary.

As regards India’s wheat purchase policy, a serious review at the highest level in the Government is imperative to ensure decisions are taken in a transparent manner in the best interest of the country.

It is believed that another tender will be floated early next week. What fate befalls it remains to be seen.