The Hindu Business Line : Move to scrap wheat tender raises uneasy questions

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Move to scrap wheat tender raises uneasy questions

G. Chandrashekhar

Mumbai June 1 There is absolutely no reason for anyone in the Government or in the State trading agency to feel smug about cancellation of the 10 lakh tonnes wheat tender. No doubt, the country has saved a tidy sum by not agreeing to import high priced wheat. But it is a matter of shame that the entire tender process - from floating till scrapping - was handled in an utterly bizarre manner.

A closer look at all the aspects of the wheat buying process would reveal complete lack of professionalism and ignorance of global market dynamics on the part of STC and Food Ministry officials. Coming on top of fiasco caused by Food Corporation of India's wheat buying attempts (the famous "call option") last month, STC's handling of latest tender does little to enhance the country's credibility in the global marketplace.

There is no doubt that the country has to import wheat, perhaps as much 30-40 lakh tonnes to augment indigenous availability and control prices. When the import decision was taken sometime in April, there were serious apprehensions of a global wheat price flare up following drought threat to Australian wheat crop.

STC tender was announced on April 30. Ironically, just around the same time, Australia began to experience heavy rains not seen in last 10 years. By early to mid-May, there were clear indications that the Australian wheat crop would not be devastated as earlier feared.

STC's tender opening was postponed from May 10 to May 18 by which time no one in the global marketplace was in doubt about wheat crop and price outlook. Yet, on May 21 STC opened the tender and initiated a dialogue with parties. Indeed, it went as far as renegotiating the rates. Now, a facile option has been exercised, that of scrapping the tender on the ground that the Food Ministry has not agreed to the price negotiated. It may be smart move to avoid and invalidate the tender; but it has raised several uneasy questions about professional ethics of the government itself.

There are also reports doing the rounds of the market about strong American lobbying to supply wheat to India. There are attempts to pressure the government to relax some of the quality norms to suit American interests.

The lobbyists have reportedly reached the highest levels in the bureaucracy to have their way.

Whether any connection exists between the scrapping of tender and American lobbying is unclear; but the entire episode has created a flutter among international trading houses. They are likely to become increasingly wary of dealing with India.

Meanwhile, FCI's wheat procurement is likely to register just about 120 lakh tonnes (versus 95 lakh tons of last year), far below the ambitious target of 150 lakh tonnes. However, there may be no respite from firm prices. There will be no escape from import of 30-40 lakh tonnes to augment supplies and keep the market under a leash.

The world market too is well aware of India's needs. The scrapping of the tender has had not impact on Chicago Board of Trade prices. However, with improvement in Australian situation and possibility of European supplies from July coupled with American interests, offers in the next tender may be around $250 a tonne levels.

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