India might cut or abolish wheat import tax to boost supply, check prices

India is considering cutting or even abolishing a 40 per cent import tax on wheat and lowering a limit on the amount of wheat stocks millers and traders can hold, a government official said on Friday, as part of efforts to boost supplies.

"We have options like lowering or abolishing the wheat import duty and tweaking the stock holding limits to control prices," Sanjeev Chopra, the most senior civil servant at the federal food ministry, told reporters.

"The options are under consideration. The government is committed to controlling prices," Chopra said.

India in June imposed a limit on the amount of wheat stocks traders can hold in an effort to bring down prices. The government is also offering wheat to bulk buyers such as biscuit makers to augment supplies in the local market.

Wheat prices in New Delhi have jumped 12 per cent in the past four months to 25,174 rupees ($303.85) a metric ton, the highest in nearly six months, as trade and industry officials say production was hit by erratic weather.

There was no proposal to import wheat from Russia in a government-to-government deal, Chopra said.

Wheat output rose to a record 112.74 million metric tons in 2023, up from 107.7 million metric tons a year earlier, according to the Ministry of Agriculture & Farmers Welfare. India consumes around 108 million metric tons of wheat annually.

But a leading trade body told Reuters in June that India's wheat harvest in 2023 was at least 10 per cent lower than the farm ministry's estimate.

Still, wheat stocks at government warehouses were at 28.3 million tonnes against a target of 24.5 million tonnes.

The decisions to lower or axe the wheat import tax and tighten local stock holding limits would help boost supplies "during the festival season", said Rajesh Paharia Jain, a New Delhi-based trader.

Festival demand for foodstuff peaks around October.

India banned exports in May 2022 after a sudden rise in temperatures clipped output, even as exports picked up to meet the global shortfall triggered by Russia's invasion of Ukraine.

On Friday, Chicago wheat futures snapped a seven-session slide on rising tensions in the Black Sea grain export region after a Ukrainian drone attack near the Russian export hub of Novorossiysk rekindled global supply fears.

After last year's wheat export ban, India, which accounts for 40 per cent of world rice exports, last month ordered a halt to its largest rice export category to calm domestic prices.

Separately, the food ministry on Friday said the country has more than "sufficient stock" of sugar. Sugar stocks totalled 10.8 million tonnes, sufficient for this season's demand and next season's optimum carryover stocks of about 6.2 million tonnes.

($1 = 82.84 rupees)