India Set To Allow Wheat Import After 6-Year Long Hiatus: Here's Why

After a six-year hiatus, India is set to resume wheat imports to replenish dwindling reserves and stabilise soaring prices following three consecutive years of poor harvests, as per a report by The Economic Times.

The upcoming government is anticipated to lift the 40 per cent tax on wheat imports this year. This move would enable private traders and flour millers to source wheat from major producers like Russia, although in limited quantities.

The government is likely to wait until after June to remove the import tax, aligning with the new-season wheat harvest and Russia's crop availability.

"There is a compelling case for the removal of the wheat import duty," stated Pramod Kumar, president of the Roller Flour Millers' Federation of India. "That is the best possible way to ensure sufficient supplies in the open market."

A government source stated, "The considered view is that the wheat import duty should be removed after June, so that the private trade can import wheat. And to protect our farmers' interest, the duty should be reinstated before wheat planting starts in October."

1. To prevent a price surge during the peak demand in October's festival season.

India’s wheat production has been hit hard in recent years. After five consecutive record harvests, extreme heat in 2022 and 2023 significantly reduced the wheat crop, leading the world's second-largest producer to ban exports.

This year's crop is also projected to be 6.25 per cent lower than the government's estimate of 112 million metric tonne, according to a leading industry body.

Domestic wheat prices have remained above the state-set minimum purchase rate of 2,275 rupees per 100 kg and have been rising recently. State wheat stocks fell to 7.5 million metric tonnes in April, the lowest level in 16 years, after the government sold over 10 million tonnes to flour millers and biscuit makers to control prices.

"The removal of the import duty will help us ensure that our own reserves don't fall below a psychological benchmark of 10 million tonnes," said a government official.

2. Efforts to rebuild state wheat stocks have been challenging.

Since the harvest began in April, the government has only managed to procure 26.2 million metric tonnes, falling short of its 30-32 million metric tonne target.

Despite advising trading houses to hold off on purchases to allow the Food Corporation of India to buy more, state procurement is unlikely to exceed 27 million metric tonnes, according to a New Delhi-based dealer.

The country requires nearly 18.5 million metric tonnes of wheat for its extensive food welfare programme.

3. Previous responses to demand for wheat imports

The government has previously resisted calls for wheat imports to avoid upsetting farmers, a crucial voting bloc.

However, the end of the lengthy election process mitigates this concern.

India's main opposition party, Congress, has promised to double the current monthly supply of 10 kg of free grain to beneficiaries if elected, highlighting the political sensitivity surrounding wheat imports.

4. Effect on global wheat prices

While India's import requirements are modest, they could influence global prices.

Benchmark wheat prices in Chicago recently reached a 10-month high due to concerns over crop losses in the Black Sea region.

"Despite the recent rise in global prices, imports at zero duty are economically viable. The new government should remove the duty to enable trade to import," emphasised Kumar, the flour milling official.