The latest Monthly News Report on Grains from the Food and Agriculture Organization (FAO) featured the Government of India’s recent implementation of a 10 percent customs duty on wheat imports. This follows speculation earlier this year that India could return to being a net wheat importer after weather shocks led to drops in forecasted production. The tariff is the first of its kind in eight years and is scheduled to last until March 31, 2016.
Reuters reports that this policy comes after officials from the ministries of farm, food, trade and finance met to discuss ways to curb imports when government stocks are ample.
“In June private firms signed deals to import 500,000 tonnes of premium Australian wheat, the biggest such purchases in more than a decade, which led to criticism Prime Minister Narendra Modi's government was letting farmers down. Some flour millers in India's port cities contracted to buy the wheat after rain and hailstorms earlier this year damaged crops, especially high-protein varieties used to make pasta and pizzas.”
Finance Minister Arun Jaitley estimates that the revenue from the tariff will be about 900 million INR ($14 million USD), according to a recent report from the US Department of Agriculture. An estimated 400,000 metric tons of wheat were already shipped into India this year through private trade before the imposition of the import duty, but there was a lull in new contracts since mid-July with reports that this new policy was imminent. The USDA predicts, however, that import prospects are likely to improve after October/November: by that point, the demand for quality wheat for blending with domestic wheat adversely affected by the 2015/2016 weather is expected to outweigh the financial hit of importation for private firms. On the whole, the wheat import forecast for the year has dropped from one million to 0.8 million metric tons (MMT), while production is still estimated at 87 MMT.
Meanwhile, Reuters also reports that the institution of the tariff could be due in part to concerns that wheat imports rejected by other countries for quality reasons will make their way into the Indian market.
BY: Rachel Kohn, IFPRI