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India’s wheat imports doing little to ease rates
NEW DELHI: India’s efforts to rein in wheat prices through massive imports appears to be failing with mounds of wheat backing up at the country’s overtaxed ports.

India has ordered a whopping 5.5 million tonnes of wheat from abroad since February, hoping to provide the basic staple to its more than 1 billion people at affordable prices. The government allowed private traders to import wheat duty free and empowered states to tap wheat hoarded by traders and speculators.

The government this week sharply raised the support price it would pay farmers for next summer’s wheat crop, to push up yields and draw out stocks belonging to farmers. But nothing seems to have worked as prices have moved in only one direction up. India’s wheat prices have zoomed to their highest levels in the last 10 years to 11,050 rupees ($247) a tonne and further price increases are likely in the coming winter months when consumption peaks.

“The government has exhausted all options. If you import more, it will further fuel global and domestic prices,” said Shardul Sharma, an analyst with Sharekhan Commodities.

Sharma said choked supply lines and clogged ports with the sudden inflow of imports were adding to government woes and pointed to faulty planning.

“The dramatic transformation of the country’s food grains economy in three short years — from a 60-million-tonne inventory in 2003 to a 6-million tonne importer in 2006 should provide an abject lesson for policy makers,” the Hindu Business Line said in an editorial on Thursday.

Ports clogged: Government and port officials say more than 400,000 tonnes of imported wheat are sitting at two key Indian ports as freight train and manpower shortages hinder efforts to clear arrivals.

Officials say the pile-up was because of a bunching of shipments and are hopeful of clearing the backed up wheat in the next 10 days. But traders do not share the optimism. “There is no magic wand to clear the entire cargo in two weeks,” said Mohan Narang of a leading New Delhi trading firm. “Even if they load two freight trains a day, it would take more than 80 days to clear the backlog.”

Another analyst with a Mumbai-based broking firm said the blockade at ports had added to headaches caused by the slow pace of imports, quality concerns and globally high wheat prices. She said the infrastructure bottlenecks were known and the resultant problems were anticipated. “We cannot get up one day and say we need 5.5 million tonnes of wheat to be imported.” Analysts said such huge purchases needed to be staggered over several months with considerable advance planning and foresight.

India’s sudden announcement this year that it would buy large quantities surprised the market as previously New Delhi had kept on saying there was no need to import.

Analysts said it was becoming clear that the government’s assessment of this year’s wheat crop was awry and output was much lower than even their scaled-down levels of 69 million tonnes from the earlier estimate of 74 million. They said any wheat stocks would have come out with the government putting limits on the stocks that trade could hold and with prices shooting sky high.

“No one is going to keep the wheat at home when domestic prices are high, Chicago wheat prices are flaring and Australia is looking at a much smaller crop,” said Sharma. Business Line said the firm international market was likely to put further upward pressure on domestic prices and consumers were unlikely to get a reprieve. reuters
MGR Archive 5.11.2006
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