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Wheat exports hit a hurdle over Finmin objections

The food ministry's proposal to export 2 million tonne wheat from FCI godowns at subsidised prices has hit a roadblock after the finance ministry raised objections to the scheme.

, ET Bureau|
Last Updated: Jun 25, 2012, 06.29 AM IST
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NEW DELHI: The food ministry's proposal to export 2 million tonne wheat from FCI godowns at subsidised prices has hit a roadblock after the finance ministry raised objections to the scheme.

"The government will have to shell out an export subsidy of 750 crore for 1 million tonne, which is not justified," said an official in the finance ministry. After the PM's economic adviser Dr C Rangarajan recommended a subsidy for shipping out excess grains, the food ministry has been preparing a suitable policy, which has to be approved by the Cabinet Committee on Economic affairs. "At a time when prime minister Manmohan Singh has hinted at a substantial cut in subsidy to rein in the fiscal deficit, the finance ministry's reservations may put a spanner in the food ministry's plan," the official said.

The commerce ministry, through government-run trading company State Trading Corporation, had invited bids to discover export prices. It received six quotes, ranging between $150 ( 8,250) and $230 ( 12,650) per tonne. Multinational trader Glencore International was the top bidder.

These prices are significantly lower than the government's cost of 18,220 ($328) a tonne for buying and storing the grain. Global wheat prices are expected to drop further in July after Russia's new harvest becomes available for export. "The government will have to pay the difference if exports have to happen. It is better to trade off the excess grain in domestic market at subsidised rates," said a commerce ministry official.

The government recently decided to push another 6 million tonne of grains to ration shops and sell 3 million tonne of wheat at below minimum support prices for bulk purchasers like biscuit makers and wheat flour companies to ease mounting pressure over its choked godowns after the record procurement of 82 million tonne.


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