Centre may lower import duty on wheat to combat sharply rising prices

According to trade and market participants, the government may decrease import duties on wheat as part of measures to offset the commodity's steeply rising prices in recent weeks. Though there is no official confirmation, industry participants anticipate efforts to prevent a spike in flour prices during the festival season, which begins this month.

Wheat is subject to a 40% import tariff in India.

Some equities from the Central pool could be liquidated for private traders, and surplus holdings could be reduced. However, traders say that removing import duties will not help much in the current global environment because the globally landed price of Indian wheat is around Rs 3,000 per quintal, while the maximum price at which Indian wheat is selling domestically in southern ports is Rs 2,700-2,750 per quintal.

"At the moment, it does not make sense to lower the import duty because domestically available wheat is still cheaper than that in global markets," a senior industry official said. "However, with Russia and Ukraine agreeing to allow the passage of stored wheat and the US expecting a bumper harvest, global prices may soften, bringing parity with domestic rates."

Wheat prices in the country's major markets reached a record high of Rs 23,547 per tonne last week. That was over a 12% increase from the previous lows following the government's sudden restriction on wheat exports on May 14. According to Reuters, the increase was caused by increased demand and limited supplies as a result of a heat wave that destroyed the crop. The Centre had regulated wheat exports in recent months to moderate prices and ensure that corrupt operators did not use the opportunity to export extra flour.

In April 2022, India exported approximately 95,167 tonnes of wheat flour (atta), according to the food ministry. This compares to about 26,000 tonnes in April 2021, an almost 267 per cent increase.