Costly proposition

New Delhi, July 10: The government today decided to import half a million tonnes of wheat at a price of $317-330 or Rs 12,700-13,500 a tonne after having earlier scrapped a tender to import wheat at an average price of $263 or Rs 10,500 a tonne in May this year.

Officials said the deal was sure to raise questions from the Opposition in the monsoon session of Parliament as the government will lose almost Rs 125 crore in the deal.

“That is the difference if half a million tonnes of wheat would have been bought at May prices. If wheat had been bought in the domestic market the difference would have been larger,” officials said. Market prices in India are between Rs 10,000-11,000 a tonne.

The decision to import half a million tonnes of wheat to maintain a buffer stock was taken against earlier plans to import a million tonnes of the grain.

The food ministry has asked the State Trading Corporation (STC), which issued the tender last month, to import 5.11 lakh tonnes of wheat from three commodity traders — Cargill, Toepfer and Riaz.

The government has so far bought around 11 million tonnes of new-season wheat from domestic farmers at Rs 8,500, refusing to raise prices even though the prevailing open market price is nearly 20 per cent higher than its fixed procurement price. The government buys wheat and rice through state-run agencies from farmers for a buffer stock as well as for its nation-wide chain of ration shops.

“However, the problem is that the government needs to have more wheat in its stock if it wants to effectively enter the market and control prices here,” officials said.

Higher prices of wheat and other food items had led to public outcry which political parties partly blame for the string of reverses faced by the Congress-led alliance in elections to state assemblies earlier this year.

The government’s buying price sets the market trend in the country and a dip in its granary stocks can trigger a price rise with private traders trying to profit as they did last year when grain prices went up 40 per cent.

Top officials said at these high offer prices from global traders, the government was unlikely to place large orders. It has the option of buying at rates above the minimum support price from the open market or even of waiting for Australian wheat to come to the market later this year.

Earlier in May, the STC had invited tenders for wheat and later scrapped them saying they were very expensive. However the fresh bids are higher by $50. The May bids were around $267-302 a tonne.

The STC called for bids last month for grains to be shipped to the country between August and November.