India Extends Wheat Import Tax to Protect Farmers During Harvest

  • Government keeps 25 percent duty on imports until June 30
  • Tariff makes overseas purchases unattractive, flour mills say

India extended a tax on wheat imports by three months to protect farmers in the world’s second-largest grower from cheap overseas supplies.

The 25 percent duty will stay until June 30, the Finance Ministry said in a notification dated March 28 on its website. India first imposed a 10 percent duty on imports in August and increased it to 25 percent in October through March, citing a decline in global prices and its adverse impact on domestic growers.

The tariff extension comes amid forecasts for a rebound in the Indian crop from a five-year low and should prevent distressed sales by farmers during the harvest. Output will total 92 million metric tons to 93 million tons in 2015-16 after untimely rain and hail recently caused some damage to the crop, Agriculture Minister Radha Mohan Singh said March 19. The ministry earlier estimated the crop at 93.8 million tons compared with 86.5 million tons a year earlier.

“It will not make any sense to import wheat at this duty,” said P. Gunasekaran, president of the Tamil Nadu Roller Flour Mills Association. “We will have to manage with local wheat for the next three months before planning our imports. As such the quality of Indian wheat is good this year.”

Australian Wheat

The landed cost of Australian wheat in southern state of Tamil Nadu will be 21.50 rupees a kilogram ($323 a ton) compared with about 19.50 rupees for good quality wheat from north India, said Gunasekaran. Overseas purchases are seen at 500,000 tons in the year ending March, compared with 52,000 tons a year earlier, according to the U.S. Department of Agriculture.

“Lower import duty on wheat would lead to a fall in wheat prices in the domestic market and farmers will incur heavy loss while traders will purchase from farmers at lowered price,” Agriculture Minister Singh said on March 19.

The import duty will help growers get better prices during the harvest and is in line with Prime Minister Narendra Modi’s target to double farmers’ income in five years, Gunasekaran said.

Wheat futures in Mumbai have fallen 6.6 percent this year, compared with 0.3 percent gain in prices on the Chicago Board of Trade.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE