Economy

To beat ban, 60% of LCs for wheat exports ‘back-dated’

Prabhudatta Mishra |Amiti Sen | | Updated on: May 24, 2022

Jalandhar: A worker silhouetted against sunlight sorts wheat grain at a grain market, in Jalandhar, Tuesday, April 19, 2022. (PTI Photo)(PTI04_19_2022_000194A) | Photo Credit: -

DGFT firm on allowing shipments only if LCs opened before May 13

About 60 per cent of the nearly 1,000 irrevocable letters of credit (LCs) received by the Directorate-General of Foreign Trade, an arm of the Commerce Ministry, seeking wheat export permit has been found to be back-dated going by a random checking.

This comes amid intense lobbying by traders and exporters to allow export of wheat already contracted. But the government is equally firm in allowing exports only if irrevocable Letters of Credit (LCs) have been opened on or before May 13, the day the notification prohibiting exports was issued.

The back-dated LCs came to light after the DGFT found that the date of the message exchange between Indian and foreign banks was after May 13.

Fraudulent transactions

Pointing out that some fraudulent transactions had come to its notice, the DGFT on Monday said it would not allow any wheat for export for which an LC has been opened after May 13.

“Information has been received from sources that fraudulent backdated LCs showing date of issuance as on or prior to May 13, 2022, are being submitted by some unscrupulous exporters for the issue of RCs (registration certificates),” it said. Both the LC and message exchange date between Indian and foreign banks should be “on or prior to May 13”, it said.

On Tuesday, by another notice, the DGFT asked its regional authorities to issue manually signed and stamped physical copies of the registration certificates (RCs) to prevent misuse of digitally signed copies of RCs. It asked traders to present such RCs to the Customs for facilitating exports.

According to the source, “The DGFT is examining all requests made by exporters seeking exemption of the ban as we are committed to allow all genuine contracts made before the ban,” said an official source. It is unlikely that the banks would have erred in issuing the LCs as they would not want to stake their reputation.”

If the DGFT stands firm on not allowing exports via back-dated LCs, then it could bring down the export volumes to 2 million tonnes (mt), though exporters have sought approval for 5.2 mt, sources tracking the development told  BusinessLine.

It is estimated that the country has shipped 1.8 mt of wheat this fiscal until the ban was slapped to rein in domestic prices. For banning export, the government had cited price rise, in certain parts up to 40 per cent year-on-year, and said its primary goal was to curb food inflation, and then ensuring food security.

COD route

Industry sources said many exporters had chosen the COD (cash on delivery) route due to the price volatility and had received some advance from their buyers. However, the government is not inclined to accept the receipt of an advance as an indication of a genuine contract and has rejected their demand, sources said.

“As we have received the advance payments and used that to buy wheat, how do we fulfil the commitment now,” an exporter wondered, adding that he would lose much if he had to return the advance.

Published on May 24, 2022
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