Commodity News

Government Raises Import Duty on Wheat to Support Local farmers

To provide some support to the local farmers, the government has increased its import duty on wheat to 40 % from the previous 30%.

The move comes as Prime Minister Narendra Modi led BJP government looks to contain rural dissatisfaction due to lower crop prices amid general elections that started on 11th April and will conclude on 19th May.

Prices of local wheat have dropped over 11 % in 2019 due to abundant supply from last year's crop and forecasts of record production. The increase in duty is likely to make imports of wheat unviable for flour mills even after recent drop in the global prices, potentially dragging further on international grain markets.

Head of commodities & currencies at Inditrade Derivatives & Commodities, Mumbai Harish Galipelli said, “The local wheat production is higher. The centre is now trying to make sure that prices remain above support levels”. India has increased the price at which it purchases new-season wheat from local growers by 6 % to 1,840 rupees / 100 kg for the current year.

The government generally buys about a quarter of such wheat from growers at state-set prices to build stocks to manage a major food welfare programme. Wheat production in India will rise 2 % in 2019 from the year before to a record 99.12 mt or million tonnes, as per the estimates from the agriculture department. Only 1 wheat crop is grown in India every year, with planting that starts in late October and harvesting done in March. Government wheat stocks stood at 17 mt as of 1st April, up nearly 30 % from the same time last year.

A Mumbai-based grain dealer with a global trading company said, “At 40% import duty, imports are not viable for the flour mills. They have to purchase local crop”. The dealer refused to be identified as he was not allowed to speak with media.

In 2017-18 fiscal year, Indian flour millers had imported 1.65 mt of wheat, which was down from 5.7 mt in the previous year. The shipments were mostly from Russia, Australia and Ukraine.

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