Govt rejects wheat export applications worth 1.5 million tonnes so far

Amiti Sen | | Updated on: Jun 04, 2022

India banned exports of wheat on May 13 after the grain’s production was affected by the heatwave that swept across the country in March and April, while the Food Corporation of India (FCI) was unable to procure even 50 per cent of the target set for this year for buffer stocks and distribution through the public distribution system.

DGFT likely to appoint an ex-banker with expertise in LCs to assist in tightening of scrutiny process

The Directorate General of Foreign Trade (DGFT) has rejected applications for export of wheat worth 1.5 million tonnes (mt) so far after it put in place a multi-layered scrutiny process for letters of credit (LCs) to ensure that only those issued and transmitted before the imposition of export ban on May 13 are approved, an official tracking the matter has said.

The rejections are likely marginally higher than the approvals given to about 1.4 mt wheat till date while many more applications are still under scrutiny.

“The government is now in the process of appointing an outside expert — an ex-banker with expertise in the area of LCs — to assist a two-member internal committee in making the scrutiny process tighter to identify offenders,” the source told BusinessLine.

Commerce & Industry Minister Piyush Goyal said on Friday that strict action will be taken against exporters who are trying to ship or have shipped wheat by submitting back-dated and improper documents following the ban on exports of the crop.

Tightening the screws

The government had banned wheat exports on May 13 after it realised that the unprecedented heat wave in March had hit production. But, as it subsequently relaxed the ban to allow shipments for which valid irrevocable letters of credit had been issued on or before May 13, it was flooded with such applications online leading to the concern that some of these may not be valid or be faced on fraudulent documents.

The DGFT, on Monday, directed its Regional Authorities to physically verify all documents of applicants for export of wheat before issuing Registration Certificates (RCs).

“The DGFT has now added another layer to the scrutiny process. It has asked the RAs to cross check the LCs with the advising or recipient banks,” the official said.

Interestingly, many of the applications rejected so far by the RAs is because of a discrepancy in the dates of the issue of LC and the date registered on the SWIFT system (the vast messaging network used by banks and other financial institutions use to send and receive information) which has happened due to a transmission delay, the official said.

“In many of the importing countries, for instance in some Islamic nations, Thursdays and Fridays are non-working days. So, an LC issued on May 12 or May 13 may not have got transmitted on those days. This resulted in the difference in dates between the date of issue of LC and date of Swift registration. As per the government’s decision, such applications have to be rejected as the transmissions have happened after May 13,” the source said.

Earlier, the DGFT had issued a circular warning wheat exporters that it could refer cases to the Central Bureau of Investigation and the Economic Offence Wing if they were found to be using back-dated LCs to illegally get permits for outbound shipment of the grain.

“The scrutiny process of LCs for wheat exports is on at the DGFT. Based on what the findings are, suitable action would be taken,” the official said.

  • About 1.5 million tonne of LCs for wheat exports rejected so far by DGFT after scrutiny
  • Many LCs rejected due to discrepancy in date of issue of LCs and date of transmission
  • Holiday in importing countries could be one reason for delay in transmission
  • Govt may appoint ex-banker with LC expertise to assist scrutiny
  • Additional layer of scrutiny introduced with authorities also cross-checking with recipient banks
  • Strict action to be taken against exporters if fraud detected
Published on June 04, 2022
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