• Why are we importing wheat?

India is the world’s second biggest wheat consumer after China. For nearly a decade after the Green Revolution, India had sufficient stocks of wheat. So much so that by 2002, godowns were overflowing with rotting grain. But last year, the production fell drastically and the Government could not procure enough to even supply wheat for the PDS and its welfare programmes. Some private companies were also allowed to buy from farmers directly. As prices began to rise, the Government decided to import. Unfortunately, the same year, the crop in other wheat-growing countries did not too well either. Unfavourable weather damaged the crop in Australia, Europe, Russia and Ukraine, leading to the lowest global inventories in 26 years.

• What was surprising about the decision taken on Monday?

Barely two months ago, the Government cancelled a wheat import tender for 10 lakh tonnes on the excuse that $263 per tonne quoted by global suppliers was too high a price. On Monday, it decided to buy 7.9 lakh tonnes by paying 150 per cent more, or $390 per tonne. The Government says it is keeping an eye on the spiralling prices on the Chicago Board of Trade rather than its domestic prices, which are well within control at the moment. They do not want to take any chances with rising food prices anytime this year and the next.

• Why does the country need to import when the domestic production of wheat is enough?

Unlike last year, the country is estimated to end up with a decent yield —- 74.89 million tonnes of wheat. However, even though the Government announced an MSP of Rs 850 per tonne this year, it has only managed to procure 11 million tonnes so far. According to official records, large private companies have bought 18.76 lakh tonnes at a slightly higher price than what the Government offered. The rest is unaccounted for, lying with small traders and millers. The Government’s argument is that it needs to keep stocks in its godowns for PDS, emergency rations like in times of floods and for its welfare programmes like food for work. Hence the decision to import 5 million tonnes this year.

• Why is the Government policy debatable?

This price is way above any price contracted in the tenders this year and last year. The current import price (at about Rs 16,000 per tonne) is 88 per cent more than the minimum support price (MSP) of Rs 850 per tonne. A school of thought is that the Government could have paid this extra price to farmers at home to buy this additional quantity instead of procuring from abroad. It is not as if there is no wheat in the domestic market.

• What is the implication of our decision on international prices?

Once India announces imports, it also impacts international prices. This year, lack of rainfall in Europe, Australia and South Africa has affected wheat production. Wheat from Ukraine and Russia will hit markets only by August. Argentina, a major wheat exporter, has banned wheat export to control domestic prices. With all this, the only players left are the US and Canada, where the price of wheat is already up by $40 per tonne over last year. In any case, India does not buy from the US, saying its crop has weeds that are unacceptable to India. Given the global supply crunch, announcement of imports by India pushes the international prices up even more.