Distress sale of wheat in MP and Gujarat

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Delay in imposing import duty triggers panic

Distress sale of wheat in MP and Gujarat
The cautious approach by the government in delaying a decision on imposing import duty on wheat has led to distress selling of the new crop by farmers in Madhya Pradesh and Gujarat, the two states where it is harvested early.

Even five days after the Centre started procurement of wheat, which began a fortnight earlier than scheduled April 1, prices in many mandis or wholesale market yards, rule below the minimum support price (MSP) of Rs 1,625 a quintal. In both Madhya Pradesh and Gujarat, farmers in many places are forced to sell the fair average quality wheat at as low as Rs 1,500 a quintal. However, the sarbati variety, which always commands a premium over the common wheat, is higher at around Rs 2,000 a quintal. “We will see the trend in procurement and then decide on the import duty,” said an official.

The consumer price and farmers’ rate are both equally important for the government, he said, adding that the decision to scrap import duty was taken when domestic prices suddenly started surging.

He also said that most of the crops would start arriving after April 1 instead of the normal April 14, as it was sown early. The current arrival is very little and the Centre will ensure that farmers get the MSP.

The agriculture ministry had estimated wheat production for 2015-16 at 92.29 million tonnes, which according to traders is very high. Their calculation put it around 84 million tonnes, based on arrival. Whatever be the correct estimate, the market prices indicated lower availability.

On December 8, 2016, the government had scrapped customs duty on wheat import from 10 per cent to boost domestic availability and check rising retail prices. This time, the government does not want to take any chances before being fully convinced that there would be a bumper harvest.

Within two months of reduction in customs duty, 30-40 lakh tonnes of wheat has been imported. More than 55 lakh tonnes of wheat has been imported during this financial year, the government said.

Flour mills in the southern states of Tamil Nadu and Karnataka buy from Gujarat and Madhya Pradesh because of superior quality of wheat. But they are absent from the market since they are flushed with imported stuff now, traders said. The food ministry has already agreed to raise the import duty to 25 per cent and the finance ministry may take a decision by this month-end.

The government should not have been over conscious on wheat. Prices were around Rs 2,000 a quintal during the sowing season when farmers did not have stocks. But rates have fallen to Rs 1,400 a quintal as farmers are now bringing their crops, said Sudhir Panwar, president of the Kisan Jagriti Manch.

Even if they impose duty now, the prices will not rise, as traders will decide because of a bumper crop, he added. Farmers have limited holding capacity, so a little delay by traders in purchasing the crop will reduce the price, Panwar pointed out. India will have a record wheat production of 96.64 million tonnes in 2016-17 crop year (July-June) as against 92.29 million tonnes in 2015-16, as estimated by the agriculture ministry.

prabhudatta.m@mydigitalfc.com

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