On 22 June 2006, the Union Government allowed duty-free import of wheat by private parties and halted all exports of pulses with immediate effect. The decision, taken at a meeting of the Cabinet Committee on Prices (CCP), follows spiralling prices of these two essential commodities. Even at the wholesale end, spot wheat was quoting at Rs 865 a quintal in Delhi, 13.8 per cent more than last years corresponding level of 760 a quintal.
The increase has been sharper in pulses: from Rs 1,748 to Rs 2,450 (40 per cent) for chana or chickpea and from Rs 1,855 to Rs 3,155 (70 per cent per cent) for urad or black gram.
"We have now allowed flour millers, biscuit manufacturers and bread makers to import wheat on the same condition applicable to the State Trading Corporation of India (STC)," the Union Agriculture and Food Minister, Mr Sharad Pawar, said.
Till now, wheat was freely importable at 50 per cent duty, with STC given approval to import up to 35 lakh tonnes (lt) duty-free for the public distribution system. The new decision will allow private actual users also to import wheat at zero duty.
Earlier in February, the Centre decided to import wheat for buffer stocks. First, it floated a tender to import five lakh tonnes. The tender was won by Australias AWB Ltd. The import has, however, run into problems after 91,000 tonnes were shipped to the country on quality issues.
The Centre subsequently floated two tenders, the first to import 30 lakh tonnes of which only eight lakh tonnes were contracted and the second for 22 lakh tonnes.
Mr Pawar did not indicate any quantitative limits on duty-free imports on private account, even while stressing that they would be allowed "till the start of the next rabi harvest". This would mean till end-March 2007, which is also the cut-off date for duty-free import of pulses that the Government announced earlier on June 8.
Regarding the export ban on pulses, too, the Minister did not set a definite time limit.
During 2004-05, the country exported 2.46 lt of pulses worth Rs 553.81 crore. Last year, total exports were estimated at around 3.5 lt. Of this, one lt was accounted for by chickpea (kabuli chana), with split lentils (chana dal, moong dal and urad dal) making up the rest.
On the other hand, imports have ranged between 22.18 lt (Rs 3,160.16 crore) in 2001-02 and 12.96 lt (Rs 1,718.64 crore) in 2004-05, as domestic output has stagnated at 120-140 lt since the mid-eighties.
State-owned PEC Ltd and Nafed have also been asked to undertake additional imports to ensure adequate market supplies.
The ban on exports comes at a time when Indian pulses, especially Kabuli chana, has been gaining ground in Pakistan and Sri Lanka.
The other decision taken at the CCP meeting was to allow duty-free import of sugar till September 30, just before the start of the next crushing season beginning October. The importers will, however, have to pay the countervailing duty of Rs 850 a tonne, equal to the excise duty payable by local mills.
"The move will have no impact, as the London Daily Price is now $460 per tonne. Adding freight of $50-60 and port discharge costs of $10, the landed cost comes to over $520 per tonne or Rs 23 per kg, excluding the CVD, local transport and margins. The imports are to be allowed under tariff rate quota.
The CCP has also directed the Cabinet Secretary to look into the existing regulations governing commodities market and recommend appropriate steps pending the enactment of the Forward Contracts Regulation (Amendment).