India to Resume Wheat Imports After Six Years to shore up reserves

New Delhi: India is planning to import wheat for the first time in six years to replenish depleting stocks and control rising prices following three consecutive years of poor harvests. According to officials and other sources, the government is considering lifting the 40% import duty on wheat this year.

Proposal to Remove 40% Import Duty:

The Indian government plans to abolish the 40% tax on wheat imports this year, making it cheaper and easier for private traders and flour mills to purchase wheat from countries like Russia. This move aims to increase the availability of wheat in the domestic market and stabilize prices.

Government Decision on Wheat Imports:

Sources indicate that the government may wait until after June, when the new season’s wheat crop arrives, to lift the import duty. Pramod Kumar, President of the Roller Flour Millers Federation of India, supports the removal of the import duty, believing it will ensure adequate supply in the open market and help stabilize prices.

Sharp Increase in Wheat Production and Export Ban:

Following five consecutive record wheat harvests, Indian farmers faced challenges due to a sharp rise in temperatures in 2022 and 2023. As a result, India, the world’s second-largest wheat producer, had to impose export restrictions. A key industry body forecasts this year's wheat crop to be 6.25% lower than the government's initial estimate of 112 million metric tons.

State Wheat Reserves at 16-Year Low: Government Measures: April, state wheat stocks fell to a 16-year low of 7.5 million metric tons. This shortage prompted the government to sell a record 10 million tons of wheat to control prices. Officials believe that lifting the import duty could help maintain stocks above the crucial 10 million ton threshold.

Challenges in Ensuring Food Supply in India: Despite efforts to replenish stocks, the government has only managed to procure 26.2 million metric tons of grain, falling short of the 30-32 million metric ton target. Ensuring sufficient food supply for India’s welfare programs continues to pose significant challenges.

India Wheat Production and Government Procurement Policy: 

Agriculture is a vital sector in India, with wheat playing a crucial role. Recently, a New Delhi-based trader indicated that government wheat procurement would not exceed 27 million metric tons. India, which operates the world’s largest food welfare program, requires approximately 18.5 million metric tons of wheat annually.

Rising Market Prices for Farmers:

Indian farmers receive a minimum support price (MSP) of ₹2,275 per quintal from the government. However, premium wheat varieties are fetching much higher market prices, currently ranging from ₹2,600 to ₹3,200 per quintal.

Reasons for Higher Market Prices Above MSP: 

This price increase is partly due to states like Madhya Pradesh and Rajasthan offering an additional ₹125 per quintal bonus above the MSP. This bonus enables farmers to hold onto their crops, leading to better financial returns as they wait for higher market prices.