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Wheat exports by private traders may be banned

The government fears grain available for local sales might be diverted to foreign markets to cash in on rising global prices.

Updated: Aug 07, 2012, 09.10 AM IST
Govt mulls ban on wheat exports by private traders
Govt mulls ban on wheat exports by private traders
NEW DELHI/ AHMEDABAD: The government may ban wheat exports by private traders under open general licence despite having enough stocks to feed the country for two years due to concerns about high global prices and the drought-like situation back home that has triggered a 20% rise in wheat futures in a month.

"There are chances that private traders may divert all the available wheat in the market -- released at subsidised rates for roller millers and ration shops -- for exports to cash in on the global rally in prices," a food ministry offical said.

''We fear that it will create a shortage of wheat resulting in a surge in domestic prices. We may ban wheat exports under open general licence (OGL)," the food ministry official said.

India has exported over 1.8 million tonne of wheat under OGL since it lifted a four-year ban on exports in September 2011.

Export prices have risen to $290-$310 per tonne from around $220 per tonne around three months ago.

Wheat futures prices, ruling at around Rs 1,470 a quintal, have risen by over 20% last month. The government now wants to ship wheat only from central stocks as it is sitting on huge stockpiles.

The food ministry official said the government wants to be the monopoly supplier of wheat from India at a time global supplies are tight and prices are rising amid dry weather conditions in other major producing countries.

"It makes business sense for the government to enter the market when prices are high, almost matching the expenses the Food Corporation of India bears on its procurement. That means there will be less outflow of subsidy on shipping the wheat," the food ministry official said.

The likely ban would put the traders in a tight spot in the global market.

"Prospects of exports have improved owing to above-average temperatures in most of the major maize growing regions of the US, Russia, Ukraine and Kazakhstan. The market will not see a ban on private traders while allowing exports by state trading firms in a positive manner," said an official of a multinational grain company.

Anil Monga, managing director, Emmsons International, which has exported 0.6 million tonne wheat, said the company doesn't expect any ban from the government.

"The country has ample stocks and we don't foresee the government banning exports by private traders. We are asking the government to take the average price of the tender and make it open for everyone to export rather than going for tenders and other formalities," he said.

Global companies such as Toepfer, Starcom, Cargill, Louis Dreyfus and Glencore have bid $260-$302 a tonne for wheat - much above the base price of $228 fixed by the Cabinet Committee on Economic Affairs(CCEA) , which had last month allowed exports of two million tonne of wheat for this financial year from over 57.3 million tonnes of wheat lying in the central stock.

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