Wheat import duty waived as domestic prices firm up

India on Thursday scrapped the 10 per cent import duty on wheat amidst a depletion of buffer stocks and rising domestic prices, in a move that would allow traders to step up overseas purchases to their highest in a decade.

Traders have imported about 2 million tonnes of wheat from Australia and Ukraine so far this fiscal. Traders have also contracted imports of 3.5 million tonnes of which around 1.8 million tones have arrived.

Australian wheat is still available at $235 per tonne, nearly 20 per cent cheaper than local supplies, at the country's southern ports, said a Mumbai-based dealer with a global trading firm.

The central government has waived import duty on wheat for an indefinite period, according to an official notification placed in Parliament on Thursday.

The announcement, which comes within months of lowering it to 10 per cent from 25 per cent earlier, comes in the backdrop of still firm retail prices that showed little signs of abating.

The duty has been waived for an indefinite period, according to an official notification placed in Parliament on Thursday.

Traders said the move could make Australian wheat cheaper by $23 per tonne and Ukrainian wheat by $10 per tonne, and could push imports up to 6 million tonnes in 2016-17, the highest in nearly 10 years.

The move comes amid uncertainty over the wheat output this year. Despite a rise in area sown, a sudden stoppage of agricultural activities following the central government's demonetisation move has raised questions over the condition of the crop as a cash shortage hampered fertiliser and pesticide use.

While official estimates of India's wheat output for 2016-17 is 93.50 million tonnes, trade sources say it will not be more than 90 million tonnes.

Experts said with the centre's wheat stocks at a nine-year low due to weak procurement and most private traders had little inventories left with them.

The landed cost of imported wheat is nearly 20 per cent lower than local supplies and the cut could prompt the local bulk consumers to raise overseas purchases in the next few months.