Some traders are suspected to be using it to beat wheat export ban.
Exports of wheat flours have witnessed a sudden and unusual spike in the aftermath of the ban the outbound shipment of wheat, industry sources told FE, indicating that many traders may be using this route to beat the prohibition on the grain’s exports. The spike is likely to alarm the government, which has already tightened its scrutiny of wheat shipments.
Sources in the milling industry said wheat flour exports may have jumped at least 7-8 times sequentially since the wheat export ban was imposed. Usually monthly exports at this time of the year are about 6,000-8,000 tonnes. However, the shipments in the month since the ban, which was imposed on May 13, could be at least 60,000-70,000 tonnes, according to the sources.
To be sure, wheat flour exports are not yet banned or restricted.
In value term, exports of wheat or meslin flour jumped 64% last fiscal from a year before to $247 million, according to the DGCIS data. In contrast, wheat exports had jumped 274% in FY22 to $2.12 billion.
“Flour exports have seen unusual surge, especially in the past 10 days or so, after the government announced a sudden ban on wheat,” said a flour miller from Karnataka. Another miller said, “There is a buzz that some traders may be using this route to bypass the wheat export ban. However, a lot of orders are also flowing in to genuine flour millers, probably as a consequence of the wheat export ban.”
On Friday, commerce, industry and food minister Piyush Goyal warned traders of action if they are found to have used illegal, back-dated letters of credit (LCs) to seek permits to ship out wheat.
His statement followed a similar warning by the directorate general of foreign trade on May 30 to refer suspected cases of back-dated LCs to the Central Bureau of Investigation and the Economic Offence Wing.
While prohibiting wheat export to control spiralling prices, the government had made it clear that supplies that are backed by LCs issued before the ban would to be allowed.
FE last month reported that exporters had submitted LCs to seek permits for despatches of over one million tonnes of wheat, way above the initial trade estimate of just about 4 lakh tonnes, leading to suspicions of attempts by unscrupulous elements to abuse the LC route. More traders have since filed the LCs to seek permits to ship out wheat.
Apart from allowing exports that were already backed by LCs, senior government officials had made it clear that India would also cater for the genuine need of neighbouring countries and food-deficit nations through government-to-government deals and honour supply commitments already made.
Subsequently, the commerce ministry partially eased the order and permitted despatches of wheat consignments that were either handed over to the Customs authorities for examination or registered in their systems by May 13. This relaxation alone was estimated to facilitate clearance of about 3.5 lakh tonnes of wheat.