Food ministry may pay price, lose right to import wheat

NEW DELHI: The government is mulling the possibility of letting the commerce ministry handle the nitty-gritty of foodgrain imports from now on instead of the food ministry. An indication was given earlier this month that there may not be any more wheat imports this year following stringent opposition by both the finance and the commerce ministries. They contended that the exorbitant price for wheat would burden the exchequer and would be a waste of precious foreign exchange.

It is understood that the suggestion that the commerce ministry handle foodgrain imports from now on was made by the food ministry itself in reaction to queries on the sageness of earlier import decisions.

The group of ministers (GoM) handling the imports had asked the food ministry at a meeting in the first week of September to clarify why it chose to scrap the first import tender for wheat floated by STC on April 30, when 3.06 lakh tonnes of wheat was offered at an average weighted price of $263 per tonne. It also asked for a clarification on why the third tender for which the price quotes were substantially higher, at an average weighted price of $389.45 per tonne, should be approved.

In response to commerce ministry queries at GoM, the food ministry is understood to have responded that the timing for floating of the first tender on April 30 and the decision to later scrap it on May 29 was based on STC’s viewpoint which, while recommending the buy at $263/t c&f, had emphasised the chances of wheat prices softening beyond August 2007 on account of a good Australian wheat crop. The ministry also cited the May 24 report of the International Grains Council (IGC) which buttressed the view.

In defence of its decision to push for the finalisation of the third tender, which was floated on August 23 and the bids were opened on August 29 and finalised by GoM on September 3, the food ministry told GoM that the prognosis on the Australian wheat output, on which it earlier banked heavily to soften the import prices after its arrival in the global market in November-December, had changed in the interim between April and August.


Unlike the IGC, the United States Department of Agriculture (USDA), the Australian Wheat Board (AWB) and diverse other sources had indicated clearly earlier in the season, following the government’s decision to ban forward trading in the commodity, that wheat supply and prices would be tight. CBOT prices for December contracts were also a good indication of this.

The food ministry is now citing the CBOT indicators that price trends would remain high beyond December as the reason why they decided to finalise the third tender despite comparatively high prices.

Some agri economists are of the view that letting the commerce ministry handle the job would ensure a sharper perspective. They argue that importing for government’s programmes when the food ministry has enough stocks to cover supply to BPL and AAY sections, may not have been endorsed by the commerce ministry.