The Central government could scrap a 40 percent duty on wheat imports and cap the amount of stocks traders can hold to try to decrease record high domestic prices in the world’s second-biggest producer, government and trade officials told Reuters on Monday.
The government banned wheat exports in May as the crop suffered a heatwave, but domestic prices still rose to a record high. Yet, global prices are still way above the domestic market, making it impossible for traders to buy from abroad. If the government does remove the duty, and international prices also fall, then traders say they could start importing, especially during the upcoming festival season, when higher demand typically drives domestic prices higher.
Domestic wheat prices ended last week at a record 24,000 rupees per tonne, having risen 14 percent from lows struck after the government surprised markets on May 14 by banning exports, ending hopes that India could fill the market gap left by the missing Ukraine grain. Domestic prices are still nearly a third lower than global prices, said a Mumbai-based trader with a global trading firm, who described Indian wheat as the cheapest in the world.
The government has limited options to intervene in the market this year since its procurement has fallen 57 percent to 18.8 million tonnes, said a New Delhi-based dealer with a global trading firm. “New crop would become available only after nine months. The government has to use stocks very carefully until then to avoid any shortage,” the dealer said.