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Traders Jittery as govt plans to hike wheat import duty by 10 per cent

Traders and processors of wheat products are concerned over a likely move by the government to impose a 10 per cent duty on the cereal grain to discourage imports

, ET Bureau|
Updated: Jul 29, 2015, 06.03 AM IST
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NEW DELHI: Traders and processors of wheat products from pasta to bread are concerned over a likely move by the government to impose a 10 per cent duty on the cereal grain to discourage imports. Analysts said the step is aimed at helping the Food Corporation of India offload wheat of poor quality on account of unseasonal rains. Traders have contracted to import over 5 lakh tonnes of wheat this year, they said.

"We have yet to receive the notification and even if it comes, we fail to understand why 10 per cent duty will be imposed. Import of 5 lakh or 10 lakh tonnes doesn’t make any difference in a country where wheat production is 900 lakh tonnes," said Veena Sharma, joint secretary of the New Delhi-based Roller Flour Millers’ Federation of India.

The 10 per cent import duty on wheat is aimed at protecting farmers from cheap overseas grain, a government official said. The commerce and revenue department will come out with the notifications, the official added. Sharma said the actual quantity of wheat imported so far does not exceed 1 lakh tonnes. "Where is the data that 5 lakh-10 lakh tonnes wheat contracts has been signed? This move will only increase prices of domestic highquality wheat and further on wheat products like atta, maida, suji and bran," said Sharma.

Flour millers typically mix premium quality Australian wheat with the local grain during milling, mostly to make high-end products such as pasta and noodles. However, according to trade analyst Tejinder Narang, the government is only trying to offload its low-quality wheat in the market while trying to prevent the entry of high-quality wheat from Australia, which is cheaper. "High-quality Australian wheat at south Indian ports is at Rs 18,500-19,000 per tonne compared with domestic prices of Rs 20,000-21,000 a tonne," said Narang.

"In the immediate impact, there could be party disputes between the buyers and sellers in the international market or between Indian importers and domestic traders/millers. Also, domestic good quality wheat prices will firm up by Rs 2-3 a kg and it will not help the government in disposing of its low-quality wheat," he said. Wheat traders said that the quality of crop procured this year was poor due to unseasonal rains during harvesting.

"Out of the 28 million tonnes of wheat procured by the government in the 2014-15 season, 90 per cent was of low quality, out of which 30 per cent is of extremely poor quality," said an official of a multinational trading company who did not want to be identified. Import duty would hurt the margins of small bakers and they would have to increase the cost of products, said Jagdish Narayan Kushawaha, president of the Society of Indian Bakers.

"Big players like Britannia, Hindustan Lever and Parle to small bakery stores will have to increase cost of products if import duty is imposed," he said, adding that small-scale bakers accounted for over 40 per cent of the Rs 30,000-crore industry.
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