With government’s effort to liquidate 2 million tonnes of wheat evoking poor response from traders due to high base price, the cabinet committee on economic affairs is soon expected to consider a proposal to lower the base price of such exports from the existing $300 per tonne (Rs 18,372 per tonne assuming an exchange rate of 61.42) to $260 per tonne (Rs 15,969.2 per tonne).
However, how far the proposal will be carried through remains to be seen as some ministries and department are against the move to lower the base price and increase the burden on the exchequer at a time when there is a possibility of international wheat prices firming up in the next few months.
BY lowering the base price, officials said it will enable FCI get more bidders for the wheat offered by it and enable quicker liquidation of its inventories. The cabinet could also consider allow FCI time till June 30 to export wheat from its warehouses as against the current deadline of March 31.
The government has planned to export around 2 million tonnes from central pool over and above the already exported 4.5 million tonnes to create space for the new harvest.
However, it had fixed a base price of $300 per tonne for exports, while the market rate dropped much below $300 due to arrival of fresh wheat from Russia. In the last tender invited by FCI the highest bid to export wheat came at around $269 per tonne, almost $31 per tonne less than the base price fixed by the government.
The result was that the entire tender was cancelled by FCI. “If the CCEA reduces the base price of wheat then there is possibility that Indian wheat might get some buyers,” a senior official from a global grain trading firm said.
He said Indian wheat has the potential to sell at around $270-275 per tonne as its quality is somewhat better than some of the alternatives available in the global market.
“But, if someone feels that Indian wheat will quote $300 per tonne in the international market, then he has not read the market properly as global prices are much lower than that,” the official said.
India produced around 92.4 million tonnes of wheat in 2012-13 crop year that ended in June, around 2.53% less than the previous year. State-run agencies like FCI procured around 26 million tonnes of the same.
According to latest FCI data, as on October 1, foodgrains stocks in state-run warehouses is estimated to be around 55.13 million tonnes as against a requirement of 21.2 million tonnes. Of this wheat comprises of 36.1 million tonnes, while the rest is rice.
Source:- business-standard.com
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