The Centre has imposed an import duty of 10 per cent on wheat and tur in a bid to check falling domestic prices and support farmers and traders.
The decision is significant as prices of agri commodities in the domestic market, especially pulses, are already under pressure due to a bumper crop.
“The import duty will result in a slight firming of prices. In the case of wheat, apart from helping farmers realise a higher price, it would also help imports as landed prices would become relatively competitive,” said grain analyst Tejinder Narang.
Raising the import duty on wheat to 25 per cent would, however, make imports prohibitive, said Narang. “But a further increase in duty is unlikely as the government has to replenish its stocks,” he added.
The move is expected to have a revenue implication of ₹840 crore at present levels of import, Arjun Ram Meghwal, Minister of State for Finance, said in Parliament on Tuesday.
The government had reduced customs duty on wheat to zero from 10 per cent in December 2016 to increase availability in the market and control prices.
But, with new wheat crops starting to arrive in Madhya Pradesh, Rajasthan and Gujarat, and the government estimating a record production of 96.64 million tonnes in the 2016-17 crop year (July-June) against 92.29 million tonnes last year, availability is no more a concern.
In fact, new-season wheat supplies have dragged prices below the minimum support price (MSP) of ₹1,625 per quintal declared for wheat produced in 2016-17, noted Angel Broking.
The import duty on wheat will augur well for the futures market as well. “After touching their lowest levels in 11 months during the second week of March, wheat futures are set to recover for the second consecutive week as procurement by government agencies at MSP is gathering pace,” said Ritesh Kumar Sahu, Fundamental Analyst, Agri Commodities, Angel Broking.
Tur dal production, too, is estimated to almost double to 4.23 million tonnes from 2.56 million tonnes last year. Farmers producing tur are having a bad run as market prices have been ruling well below the MSP for the last few weeks due to higher arrivals in mandis. To what extent farmers benefit from the import duty on tur remains to be seen as many have sold their output.