India mulls reducing wheat import duty to tame rising prices

India is considering a rare tax cut on wheat imports to keep prices in check as supplies are getting tighter. 

Domestic rates for the grain have advanced by almost 6% in the past year due to hoarding by traders. India will explore all options to keep prices stable, including easing the levy, Federal Food Secretary Sanjeev Chopra told reporters in New Delhi Monday. A ban on exports will also continue, he said.

India’s wheat production is typically robust enough to make the country self-sufficient. The last time the nation imported more than 1 million tons of the grain was the 2017-18 season, and a return to large-scale purchases could further tighten global supply. 

As of Monday, the government imposed stock limits on wheat to prevent the hoarding. While wholesalers can store as much as 3,000 tons, retailers can only keep 10 tons. These limits will remain in place until the end of March, and traders have been given 30 days to bring their stocks to permissible levels.

To combat the trend of reduced supplies, industry players proposed a cut in the 40% import tax to spur buying from overseas. If introduced, it could potentially result in the first large-scale imports in six years.

At the same time, the concerns among flour millers and bread makers about dwindling inventories are set to continue as sowing for the next crop will only begin in October and November. Harvesting will start in March next year. 

India’s weather department last week warned of below-normal precipitation in June, triggering concerns over output of water-intensive crops, such as rice and sugar. In May, the India Meteorological Department had forecast above-normal showers for the monsoon season that runs from June to September. 

The nation has no plans to review restrictions on exports of rice and sugar, Chopra said at the same briefing. The world’s second-biggest sugar producer introduced an export limit for the 2022-23 season that’s still in place.