Government of India likely to raise wheat import duty to 40 per cent

The government is likely to raise the import duty on wheat from the current 30 per cent to 40 per cent to rule out any possibility of cheaper imports amid the harvesting of the new crop. The import duty increase will force flour millers to buy wheat from FCI, which is set to offload stocks rather than source the grain from other countries.

The Election Commission (EC) is likely to clear the proposal soon to increase the import duty on wheat to 40% after the plan was approved by a panel of secretaries last week, sources said, Financial Express reported.

The Centre is expecting to buy 38-40 million tonnes of wheat this year, after which the stock with FCI may reach to about 58 million tonnes by end of May. The government is buying wheat from farmers at 1,840 rupees per 100 kg this year, up from 1,735 rupees last year

In line with the increase in the purchase price, the government is also likely to increase the base price at which it offers wheat to bulk users under the open market sale scheme.

Though the government’s initial estimates have pegged wheat output marginally lower on year at 99.12 million tonnes, most government officials expect production to cross 100 million tonnes, despite reports of damage to the standing crop in parts of northwestern India due to the recent rains and hailstorms.

Higher local prices could have made imports viable and that is not desirable this year as India is expected to produce a record wheat crop. 

India had last year increased the import duty on wheat to 30 per cent from 20 per cent to prevent traders from sourcing cheaper wheat from the international markets.

The move to increase the import duty further is in keeping with the government’s policy to discourage imports of farm products to ensure farmers get better prices for their produce, the second official said.   India had imported more than 5 million tonnes wheat in 2016-17 (Apr-Mar), and nearly 1.5 million tonnes in 2017-18, before the import duty was levied.  

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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