India plans to resume wheat imports by lowering import duties and imposing import limits, alongside open market sales. This strategy aims to control rising prices and increase supplies.
Background
As the world’s second-largest wheat producer, India has maintained a 44% duty on wheat imports for the past six years, effectively halting wheat shipments. An official indicated that reducing this duty would allow international wheat to flow into India through major southern ports starting July 1.
Traders have been urging the government to relax these duties to take advantage of low international prices. However, the issue remains sensitive for farmers, with the government forecasting wheat production for 2024-25 to match last year’s 112.9 million tonnes.
The government recently concluded wheat procurement at 26.6 million tonnes, slightly higher than the previous year’s 26.2 million tonnes but short of the 31 million tonne target.
Import Numbers
M.J. Khan, chairman of the Indian Chamber of Food and Agriculture, shared insights from a recent international grains council meeting in London, suggesting India might import one to two million tonnes of wheat to stabilize prices and ensure food security. Given production estimates are similar to last year’s, the government may permit private trade to import a couple of million tonnes by reducing the duty.
An official suggested that total wheat imports would likely not exceed three to four million tonnes.
Open Market Sales
In addition to imports, the government plans to release 2.5 million tonnes of wheat under the Open Market Sale Scheme (OMSS) starting in July or August. This follows the record release of 10.1 million tonnes during the 2023-24 rabi season.
Post-NFSA and other welfare schemes, the government is estimated to have 8.2 million tonnes available for OMSS.
Price Impact
The current price of imported wheat at Kochi and Tuticorin ports is $280-$290 (₹23,398 – ₹24,233) per tonne, with an additional ₹1,500 for port handling and packaging. In key markets, wheat prices range from ₹26,980 to ₹27,100 per tonne, while the minimum support price is ₹2,275 per tonne.
On Sunday, the all-India average price of wheat was ₹31 per kg, up 6.4% year-on-year, with wholesale prices at ₹27,720 per tonne, a 6.6% increase. Abolishing the 44% duty could bring the effective price down to around ₹25,000 to ₹26,000 per tonne.
Stock Limits
The government is also adjusting stock limits, with wholesalers allowed 3,000 tonnes, retailers 10 tonnes, 10 tonnes per outlet for big chain retailers, and processors permitted 70% of their monthly installed capacity multiplied by the remaining months of the fiscal year. Previously, wholesalers were limited to 500 tonnes, retailers to five tonnes, and processors to 60% of their monthly capacity.
The annual wheat requirement for NFSA and other welfare schemes is 18.4 million tonnes, with a closing stock requirement of 15.7 million tonnes by March 31, 2025.
These measures are being prepared as wheat prices typically rise during the procurement season, peaking in December-January.
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