Traders may fail on wheat export quota as March deadline looms

BANIKINKAR PATTANAYAK
Posted: Wednesday, Jun 20, 2012
Financial Express
New Delhi: Indian traders will likely fail again to fully export their wheat produce against the quota of 650,000 tonne within the extended deadline of March 31, 2013, due to high local taxes on grain purchases and the lack of a long-term trade policy.

After a more than two-year ban on wheat product exports, India had allowed private traders to ship 6,50,000 tonne of such items for a limited period in 2009, and the programme was extended in phases until March 31, 2011, after the industry failed to exhaust the quota, as many traditional buyers had shifted to rival suppliers after the ban. In July last year, the government again allowed traders to export until the end of the 2011-12 fiscal around 5,00,000 tonne of wheat products that were left unsold.

Since traders could sell only 178,000 tonne in overseas markets in 2011-12, the government again allowed exports of the unsold quantity by March 31 next year. However, trade executives apprehend the government will have to allow more time again for the exports in case it doesn't provide subsidy on domestic wheat purchases. An empowered group of ministers were considering providing subsidies on wheat exports as well as domestic supplies till late on Tuesday.

“A major problem is that the key producing state, Punjab, levies as much as 13.5% in taxes on wheat purchases, while Haryana imposes 12.5%, including mandi tax and procurement tax and cess, driving up the cost of the grain. So, it's difficult to stay competitive in wheat product exports in the global market,” said Veena Sharma, secretary of the Roller Flour Mills Federation of India.

Roller flour millers are demanding the government provide them wheat at a cheaper rate, in sync with the concessions it is planning for the grain's exports. Moreover, the government has now offered three million tonne of wheat to bulk consumers across the country through its open market sale scheme at a price of R1,170 per quintal.

Flour millers say a uniform price will make wheat more expensive for mills in states like Punjab and Haryana because of high local taxes, while mills in other regions will get it at much cheaper rates due to low or no taxes. So, mills in producing regions will suffer unless they are given some subsidy on grain procurement, said Adi Narayan Gupta, director at Ghaziabad-based Bhawani Roller Flour Mills.

Indian wheat is around $100 per tonne dearer than the grain from the Black Sea region, traders said. However, since Indian wheat has more protein content and caters for a regional taste, traders have managed to ship out some quantities, they said. A 25% depreciation of the rupee against the dollar in the past one year has also helped.

However, occasional curbs on exports and lack of clarity are adding to the problem. “The buyer wants assured supplies on time and nobody firms up a contract based on guess work on key issues such as restrictions on trade or extension of the shipment deadline. So a long-term policy, which will lend some kind of predictability to trade, will allay buyers' apprehension and enable suppliers to plan better,” said a miller from Karnatka.