The Food Ministry has cleared a proposal to allow export of 6.5 lakh tonnes (lt) of wheat products, even as Central procurement of wheat has topped 245 lt.
The Food Ministry has told various Roller Flour Mills Associations in the country that a decision has been taken to allow the export of wheat products and the terms would be spelt out soon.
Trade Ministry’s role
According to industry sources, the Commerce Ministry will now have to approve the Food Ministry’s move and it is seen as a formality only.
The decision to allow exports of wheat products comes on the heels of bulging buffer stocks, which are estimated to be in the range of nearly 380 lt.
“Going by the current trend, it is likely that we could have a carryover stock of 290 lt next year,” said the sources. This year, buffer stocks on April 1 were 140 lt against the norm of 42 lt.
The Centre has come forward to allow export of wheat and its products – banned since February 14, 2007 –, following good crop in the last two years and overflowing stocks.
Last year, wheat production has been put at a record 78.57 million tonnes, while this year it has been projected at 77.63 mt.
Ban on wheat came into force after production being unable to meet demand during 2006 and 2007 besides poor procurement leading to sharp fall in buffer stocks.
Global situation
Despite the Centre’s move, flour mills see little scope for exports, given the global situation where prices of wheat in other origins are lower.
“We get wheat at Rs 1,250 a quintal at our mills. At that cost, it will be difficult to produce flour and export,” said Mr K.S. Kamala Kannan, President of the Tamil Nadu Roller Flour Mills Association.
Currently, the user industries in the South are getting wheat, mainly from Uttar Pradesh, at these rates.
According to trading sources, wheat is available in Uttar Pradesh at Rs 910-915 a quintal.
“Some farmers are even taking their wheat to Haryana for sale in expectation of better price,” said the sources.
Lower prices
However, prices in most of the mandis in Haryana are ruling lower than the Rs 1,080 minimum support price fixed by the Centre.
“The fact is that the crop in Haryana and Punjab has been procured fully by the Government agencies from the Government. Procurement is almost non-existent in these places, where it is taking place on a smaller scale in Bihar, where it is expected to continue till July 15,” the sources said.
“The warehouses are full that wheat procured in Punjab is lying in open space,” the sources said.
Import costs
In contrast to the prices that flour mills are paying for wheat at their gates, particularly in the South, imported wheat could cost lower than Rs 10,000 a tonne f.o.b.
Even if freight and other costs are to be added, it is unlikely to be higher than Rs 11,000.
“We had assiduously built customers in Sri Lanka, Malaysia, Indonesia and other countries for our wheat flour. But the ban has spoilt all that. Now, when we are telling them that we might be in a position to export, they don’t seem to be in a position to entertain us. They are seeking consistent supply but how can we assure when there is no consistent policy?” asked Mr Kamala Kannan.
Industry sources point out to a FMCG firm that had been exporting flour to the UK. When the ban was imposed, it had to shut its unit here.
But it did not want to lose its market and therefore, opened an unit abroad and continued to supply, thus keeping its market intact.
futures resumption
Meanwhile, resumption of wheat futures is being ignored by spot market players by and large.
“No one is bothered about what is happening in the futures market,” the sources said.
Spot prices for wheat in New Delhi are currently ruling at Rs 1,045 a quintal, while on NCDEX, July contracts closed at Rs 1,081 on Wednesday.
Source : Business Line