25-05-2018

India raises import duty on wheat to 30% amid record domestic crop forecast

India’s import duty on wheat was raised to 30% from 20% earlier, according to a customs notice posted on the Central Board of Excise and Customs’ website.

The moves comes on the back of a record domestic wheat production forecast of 98.61 million mt for the 2017-18 marketing year, up 100,000 mt from the year before, in the government’s latest estimate released May 16.

The world’s second-largest wheat producer had already raised the import duty to 20% from 10% in November 2017 on expectations of higher local output.

Sources said the primary reason for the latest hike was to support local farmers by stemming the import of cheaper wheat.

“At current [20%] import duty, wheat imports are not at parity [with domestic prices]. It might be that the increase is to prevent any chance of Black Sea wheat from coming in,” said a trader based in Singapore.

Sowing for the current wheat season began in October-November 2017. Government agencies began procurement at a minimum support price or MSP of Rupees 17,350 mt ($267/mt) in April, which was raised from Rupees 16,250/mt last year.

That procurement has already exceeded the government’s target of 32 million mt, according to local media reports. As a result, imports to date this season have been minimal, one trader said.

Prior to the latest hike in import duty, the USDA had estimated India’s wheat imports for 2018-19 at 1.5 million mt as millers in south India were seen likely to increase usage of higher quality wheat sourced through imports during the second half of the marketing season.

However, after the latest hike, these millers may turn instead to domestically produced wheat and, coupled with the higher MSP, this may result in an uptick in domestic wheat prices, market sources said.

Source: Platts

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