Harsh facts

New Delhi, July 4: High quotations for wheat import from foreign traders have put the government in a soup.

The prices are much higher than the local rates, and if the government goes ahead and places the order, it will open itself to the charge of favouring foreigners over local farmers.

Price quotations for the import of 1 million tonnes of wheat are in the range of $320-$370 per tonne. In rupee terms this is Rs 13,000-15,000 per tonne; in the Indian market prices are around Rs 10,000 per tonne.

India has received seven bids from a clutch of global traders, including Glencore and Cargill, for the import of wheat. Today was the last day for submission of bids.

The Congress-led government had already been criticised by the Opposition in Punjab, Haryana and Uttar Pradesh for not paying enough to farmers.

The government has, so far, bought around 11 million tonnes of rabi-season wheat at Rs 8,500 per tonne. It has refused to raise prices, though the open market rates are nearly 20 per cent higher than the procurement price.

The government buys wheat and rice through state-run agencies to build a buffer stock and distribute the grain at a subsidised price to the poor through ration shops. The government rate sets the trend for market prices in the country.

For instance, a decline in wheat stocks can trigger a price rise because of profiteering by private traders in the face of scarcity. This was the reason for grain prices jumping 40 per cent last year.

Officials said the government was unlikely to place large orders at the prices quoted by the global traders.

It has the option of buying at rates above the minimum support price from the open market or even of waiting for the Australian wheat to arrive later in the year.

“We cannot afford to buy at these high prices. Worse, it will be politically embarrassing to answer questions on why we are not willing to increase the prices significantly, while we are willing to pay 70 per cent more to wheat sellers from abroad,” said officials.

Earlier in May, the State Trading Corporation invited tenders for wheat, only to scrap them for being very expensive.

In June, it announced fresh bids for imports between August and November. However, the new rates are higher by $50. The quotations in the previous month were around $267 to $302 a tonne.