NEW DELHI: Faced with bumper production of wheat in an election year the Government has raised the import duty on wheat to 40 per cent from an already high 30 per cent to discourage millers from buying wheat from abroad.
India’s wheat production is estimated at a record 99.12 million tonnes in 2018-19 crop year which runs from July to June, about 2 per cent higher than last year’s.
Government’s wheat stocks held by the Food Corporation of India stood at 16.99 million tonnes as of April 1. Government is expected to buy another 35-40 million tonnes of wheat this year, after which stock with could touch 57 million tonnes by the end of May. “The higher duty will force milers who import a trickle of wheat to buy locally and help protect farm prices,” said Prof. Biswajit Dhar of the Jawaharlal Nehru University.
The Government had in a bid to improve farm incomes raised the minimum support price of wheat or the rate at which its arm – the Food Corporation of India - buys from farmers by 6 per cent to Rs 1,840 rupees per 100 kg for 2019. This acts as a benchmark for the open market in wheat.
“This being an election year, we had to take permission from the Election Commission before the duty hike was announced. However this increase was necessary to protect local farm interests,” said officials.
Last year too the Government had increased import duty on wheat from 20 per cent to 30 per cent after a similar bumper crop, resulting in a sharp drop in wheat imports to 1.65 mt in 2017-18 from 5.7 mt in 2016-17.
Food Corporation of India is likely to offload stocks before buying more wheat say officials and the duty hike will help them get a better price from Indian millers.
India has in the past imported wheat from Australia, Ukraine and Russia. However global prices plus a 40 per cent duty would make it virtually prohibitive t ship in wheat into India. “At this high duty rate imports will be impossible,” Dhar said.
Though Australia has in the past taken India to WTO arbitration panel on its farm duty rates as well as on subsidies it gives to farmers, it is unlikely to move as India by right can raise duties on wheat up to 80 per cent under a bound rate agreement it has made at the WTO.