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India to Resume Wheat Imports After Six Years to Boost Reserves

India is set to resume wheat imports after a six-year hiatus to replenish low reserves and control rising prices following three years of poor harvests. According to sources, this move comes as the end of general elections removes a key obstacle. Officials and other sources told Reuters that New Delhi plans to scrap the 40% […]

India is set to resume wheat imports after a six-year hiatus to replenish low reserves and control rising prices following three years of poor harvests. According to sources, this move comes as the end of general elections removes a key obstacle.

Officials and other sources told Reuters that New Delhi plans to scrap the 40% wheat import tax this year, allowing private traders and flour millers to purchase wheat from major exporters like Russia, though in limited quantities. The government is likely to wait until after June to remove the import tax, coinciding with Russia’s wheat harvest.

“There is a compelling case for the removal of the wheat import duty,” said Pramod Kumar, president of the Roller Flour Millers’ Federation of India. “That is the best possible way to ensure sufficient supplies in the open market.”

A government source confirmed this sentiment, stating, “The considered view is that the wheat import duty should be removed after June, so that the private trade can import wheat. And to protect our farmers’ interest, the duty should be reinstated before wheat planting starts in October.”

Prime Minister Narendra Modi’s Bharatiya Janata Party is expected to win the election, which concludes on June 1, with vote counting on June 4.

Traders are ready to begin imports if the 40% duty is lifted. Rajesh Paharia Jain, a New Delhi-based trader, estimated that about 3 million metric tons of imports would suffice, with Russia being the most likely supplier.

“Once the government removes the duty, private trade can start importing wheat,” he said. Imports would help prevent a price surge during October’s peak demand for the festival season, according to a New Delhi-based dealer with a global trade house. Imports of 3 to 5 million metric tons would negate the need for New Delhi to sell large quantities from reserves.

After five consecutive record harvests, India’s wheat crop suffered due to a sharp rise in temperatures in 2022 and 2023, leading the world’s No. 2 producer to ban exports. This year’s crop is expected to be 6.25% lower than the government estimate of 112 million metric tons.

Domestic prices have remained above the state-set minimum purchase rate of 2,275 rupees per 100 kg and have recently started rising.

Wheat stocks in state warehouses dropped to 7.5 million metric tons in April, the lowest in 16 years, after the government sold more than 10 million tons to flour millers and biscuit makers to control prices.

“The removal of the import duty will help us ensure that our own reserves don’t fall below a psychological benchmark of 10 million tons,” said a government official.

The government has struggled to replenish state wheat stocks, managing to buy only 26.2 million metric tons against a target of 30 to 32 million since the harvest began in April, despite advising trading houses to refrain from purchases. State procurement is unlikely to exceed 27 million metric tons, according to a New Delhi-based dealer with a global trading house.

New Delhi needs nearly 18.5 million metric tons of wheat for its extensive food welfare program. The opposition Congress party has promised to double the current supply of free grain if elected.

New Delhi has resisted wheat imports to avoid angering farmers, a significant voting bloc, but this restriction is expected to end with the conclusion of the lengthy election. While India’s import needs are modest, they could still impact global prices. Benchmark wheat prices in Chicago recently hit a 10-month high due to concerns over crop losses in the Black Sea region.

“Despite the recent rise in global prices, imports at zero duty are economically viable, and that’s why the new government should remove the duty to enable the trade to import,” said Kumar, the flour milling official.

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Indian economyTDG TheDailyGuardianWheatWheat import