The Hindu Business Line : Wheat imports turn a cheaper proposition

Chennai, Nov. 25 Even as farmers in wheat-growing States await the Centre’s decision on raising the minimum support price (MSP) for the rabi crop, global traders are offering the grain from Black Sea and Ukraine at $180 a tonne c&f (Rs 9,000 a tonne). This means, the imported wheat could get into the roller flour mills, especially in South, at around Rs 10,500 a tonne.

Imports unlikely

This is in contrast to the prices of dara whet, which are ruling at Rs 11,630-12,350 a tonne in New Delhi. Including transport charges, roller flour mills may have to foot nothing less than Rs 14,000 a tonne. However, it is unlikely that the mills will go in for large scale imports for two reasons. One, importers are wary of when the Centre will reimpose duty on wheat imports, which are currently at zero and two, wheat from the Black Sea region is generally not preferred by user industries.

“But the Centre is facing a dilemma as far as wheat is concerned. First, it has to announce a hike in minimum support price for wheat, which is already under sowing this year. Second, the Food Corporation of India (FCI) holds huge stocks of wheat, estimated at over 200 lakh tonnes and it will have to find a way to dispose them of,” said trade sources.

Dip in coverage

The sources said though area under wheat was down marginally until last weekend at 84 lakh hectares against 85 lakh hectares during the same period a year ago, it was likely to pick up once the Centre’ announces the MSP. “Announcement of MSP will help a lot, particularly in Punjab and Haryana. Area in these States, at least, are likely to remain the same as last year,” said Mr Raj Sud, a trader from Khanna market in Punjab.

“Even if there is to be a fall in acreage, it will be marginal and could be compensated by better yield. The climate so far has been conducive and in additiona, monsoon has also been good,” said Mr Vinod Kapoor, President of Wheat Products Promotion Society of India. “However, the Centre has to get out wheat stocks from Punjab since kharif rice will have to stored. Wheat can be stored in the open but not rice. Still, we hope the Centre will be able to get space from the private trade,” he said.

Storage capacity

FCI has a capacity to store 25.09 million tonnes (mt) of grains, including 2.38 mt as cover and plinth, which means open area. The rest is covered space. Of this, FCI itself owns 12.96 mt capacity as on July 2008.

In New Delhi, Mr T. Nanda Kumar, Secretary, Department of Agriculture and Cooperation, said MSP would be announced after getting the Election Commission’s approval.

Problem in U.P.

He also said wheat area trailed in view of late harvest of sugarcane in Uttar Pradesh. The Commission for Agricultural Costs and Prices (CACP)has recommended a MSP of Rs 1,080 a quintal for wheat.

This is against Rs 1,000 announced for crop sown last rabi season.

A section of the trade feels that if the Centre does not accept the CACP recommendation then the area under wheat could decline.

“Prices of wheat are around last year’s level only. This year, we have not witnessed any sharp rise in the prices,” the sources said.

Meanwhile, the trade is concerned over FCI delaying sale of wheat to the user industries. It was to give the wheat under the open market sale scheme and a tender was floated to sell 8.9 lakh tonnes last month.

“So far, FCI has sold only 80,000 tonnes. We are not sure what is happening to the rest of the quantity it wanted to sell,” sources wondered.

Re-tender

But FCI officials said the organisation had retendered as the users were reported to have not been given adequate time to respond to the tender. “The retender closed on November 20 and it is being processed by the higher-ups,” they said.

If the FCI fails to clear the stocks in time, then it could lead to a glut and “most probably, we could see cheaper exports from our country”, the sources said.

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