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Tuesday, September 05, 2006

Govt allows private trade to import wheat duty-free

he government on Monday allowed duty-free wheat imports by private players to stem rising prices and augment market supplies but traders said high global prices would prevent big purchases.

"As of today there is no duty on imports of wheat," Farm Minister Sharad Pawar told reporters on the sidelines of a fisheries department meeting.

"This facility will be available for the next 4-5 months, maybe until December or January. This decision has been taken already and the orders will be issued shortly," he said.

India, with the world's largest population after China, needs to maintain a buffer stock to ensure adequate supplies for the poor and keep market prices in check.

Following a poor crop, India began buying wheat in March for the first time in six years to augment stocks with state-run Food Corp. of India which handles the public distribution system.

In June, the government cut the import duty on wheat to 5 percent from 50 percent to boost supplies in the local market.

Since then private traders have contracted imports of 500,000 to 600,000 tonnes but many firms wanted the duties to be scrapped altogether to boost supplies even more.

Until now, only government-run agencies were allowed duty-free wheat imports.

"The zero percent duty will not lead to a flood of imports," said Mohan Narang, director, K.S. Commodities Pvt Ltd. "International prices are running very high."

He said traders were awaiting further details on Pawar's announcement.

Traders said globally wheat was quoted at about $220 per tonne cost and freight, close to 10,200 rupees. Wheat in the Delhi market was trading at about 9,850 rupees per tonne.

The announcement had little effect on futures. By 0955 GMT, October futures on the National Commodities and Derivatives Exchange were 0.12 percent lower at 973.60 rupees per 100 kg.

India's state-run State Trading Corporation has contracted imports of 3.8 million tonnes of wheat since March. Last week it floated a fresh tender for 1.67 million tonnes.

Traders said the outcome of the STC tender, bids for which open on Tuesday, would give direction on prices and volumes that were available for sale.

The pace of import arrivals contracted by private trade was improving, they said.

Four ships with about 65,000 tonnes of wheat imported by private Indian firms will arrive in the western city of Mumbai in September, a senior trade official said.

He said another 250,000 tonnes of wheat contracted by private trade was expected in the southern port of Tuticorin over the next 45 days.

Government officials said six shipments of around 300,000 tonnes of wheat had been received by the Food Corp by Aug. 27 while another five shipments with about 258,000 tonnes were being discharged at southern ports.

Pawar said it was unlikely the government would have to import more wheat.

"Now we are encouraging private sector imports. So I don't think any more will be necessary, but we are open and if required, we will import," he said, adding that the measures taken should help overcome the shortage and bring down prices.

Wheat prices have risen more than 30 percent to about 1,050 rupees ($22.6) per 100 kg from 800 rupees in the last six months.

According to the Food Ministry, India's wheat stocks were estimated at 7.33 million tonnes on Aug. 1, down from 12.9 million tonnes a year ago.

State agencies have procured just 9.2 million tonnes of wheat in the current marketing year, against an earlier target of 16.2 million, leading to depletion of stocks.

But good rains have raised expectations for the coming crop. "This year, overall monsoon will be helpful for agriculture," Pawar said.

"The second spell of rains has substantially improved the situation. It will be helpful for the summer harvested crop," he added.

Wheat and rapeseed are among key summer harvested crops.

The farm minister said the government was trying to boost the acreage of wheat in the eastern states of Bihar and West Bengal and western states of Gujarat and Maharashtra, where the crop is traditionally not grown.

Source: Reuters

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