The government has decided to impose an import duty of 10 per cent on wheat, in a bid to curb overseas purchases of the grain when the granaries in the country are overflowing.
The decision to impose import duty on wheat comes after a gap of eight years, government sources said on Monday.
The government's move is in response to import deals signed by some South India based importers to buy up to 500,000 tonnes of high-protein wheat from Australia - the biggest such purchases in more than a decade.
Private flour millers had recently contracted 500,000 tonnes of wheat from Australia for the first time in a decade due to sluggish supply of domestic high protein wheat and lower international prices. They had plans to contract another 500,000 tonnes from France and Russia.
India has not imported wheat after 2006-07 when the government was forced to import millions of tonnes of expensive wheat from Russia and Australia after its own crop wilted under unusually high temperatures.
India, currently the world's second largest wheat producer and consumer after China, has stockpiled huge quantities of wheat buffer stocks procured by paying remunerative prices to farmers and failure to distribute these stocks profitably will be a big burden on the exchequer.
While the decision has been finalised at the officials level by the ministries of agriculture, food, trade and finance, the decision needs a final nod from the prime minister.
Despite surplus domestic stocks, imports were being made because of the damage to high-protein wheat crop following unseasonal rains and hailstorm early this year.
Meanwhile, international wheat prices have started rising on El Nino concerns.
This combined with the impost of a 10 per cent import duty by the government could push up overseas wheat prices to unaffordable levels, the flour mills say.