31-03-2017

Wheat Tax Won’t Deter Imports to Southern India, Millers Say

Wheat

Flour millers in India’s south say they will continue importing wheat from Australia and the Black Sea region even with the 10 percent duty imposed this week as it’s cheaper than locally grown supplies.

The world’s second-biggest consumer of wheat on Tuesday imposed a 10 percent duty after scrapping the tax in December. The measure will discourage the movement of imported wheat from the south to other parts of the country and help farmers in the northern and central regions realize at least the minimum state-set price for grain, according to P. Gunasekaran, the president of Tamil Nadu Roller Flour Mills Association.

“I would prefer Australian wheat over Indian wheat at present as it will still be cheaper,” Gunasekaran said in an interview by phone. “If the duty becomes 25 percent then imports will stop.”

Australian wheat sold for about $230 a ton at ports in the south before the tax was imposed, according to Gunasekaran. Wheat for April delivery on India’s National Commodities and Derivatives Exchange closed at the equivalent of $257 a ton on Wednesday. Black Sea region wheat would cost $222 per ton to $223 a ton including fumigation costs now, he said.

“I will start importing after three months when local harvesting is over,” said M.K. Dattaraj, chairman of Krishna Flour Mills Bangalore Pvt. “At the moment we are interested in buying local wheat. Some farmers are currently selling below” the government-set minimum support price, he said.

The landed price of Australian wheat in Coimbatore in the southern state of Tamil Nadu is 18.5 to 18.7 rupees a kilogram compared with at least 20 rupees a kilogram for similar grain from Madhya Pradesh, according to Gunasekaran. While in Bengaluru, to the north, Australian wheat sells for about 19.7 rupees a kilogram compared with 19.1 rupees for Madhya Pradesh supplies, according to Dattaraj, a former president of Roller Flour Millers Federation of India.

Imports may reach as much as 2 million tons in 2017-18, Gunasekaran said, with 80 to 85 percent likely coming from Australia and the remainder from the Black Sea. Importers will initially try to sell 250,000 tons to 300,000 tons of wheat stored near Tuticorin Port in the southern state of Tamil Nadu, he said.

That compares with a forecast of 3 million tons from S. Sivakumar, the chief executive officer of ITC Ltd.’s agriculture business division.

India is seeking to rebuild stockpiles that plunged 44 percent in March from a year earlier to 9.43 million tons, according to state-run Food Corp. India has been purchasing high-protein grain from Australia, Russia and Ukraine.

Source: Bloomberg

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