India Halts Wheat Export Proposal .

NEW DELHI – The Indian food ministry's proposal to export up to two million metric tons of wheat at a minimum price of $228 a ton has run into roadblocks as the finance ministry has raised objections over the low price, senior government officials said Thursday.

The proposed price, based on the highest bid received against a tender issued last month for exports from federal stocks, is far below the government's cost of purchase of about $300/ton. That means the government would have to give a subsidy if it wants to ship the grain.

But offering an export subsidy won't be easy as opposition politicians can accuse the government of shipping the country's wheat cheap rather than supplying to the poor at home.

"The finance ministry says the subsidy burden for exports would be too high," a government official said.

To export two million tons, the government would have to bear a subsidy of 15.56 billion rupees ($274 million), the official said.

Last month, six companies bid in State Trading Corporation's wheat export tender with offers ranging from $150 to $230 a ton. Glencore,the highest bidder, had offered to ship 100,000 tons for $228-$230 a ton.

Even if the food ministry's proposal goes through, India would be able to export no more than 100,000 tons of wheat against the tender at $228 a ton.

"The proposal will still be going to the cabinet. Finally, it's up to them to decide," another government official said.

The cabinet was to take up the proposal Thursday, but the meeting has been deferred to July 3, one of the officials said.

Separately, a proposal is being sent to the cabinet to set up an expert panel to oversee the entire process of wheat exports, officials said.

"It would help to ensure that the government gets the right price for exports. Hopefully, the price bids we receive in subsequent tenders would be better," the second government official said.

India's warehouses are overflowing as a result of bumper crops over the past three years. The stockpile exceeds the storage capacity by about 20 million tons, leaving much of the excess grain in the open, where it's vulnerable to spoilage.

Earlier this month, the government allowed subsidized sales of six million tons of grain and another three million tons of wheat for sale in the open market to trim its stocks before the new harvest in September-October.

Source : online.wsj.com