The Commerce Ministry has tightened the scrutiny of the Letters of Credit (LC) submitted by traders seeking exemption from the ban on wheat exports, as it fears that many of these bank guarantees could be counterfeit, trade sources told FEI.
Exporters expose one million tons (metric tons of wheat, about 0.4 metric tons more than the initial trade estimate, which raises suspicions of attempts by unscrupulous elements to misuse the LC route). Whether it is based on an agreement, ”said a wheat trader.
A closer look at the selection indicates that the government is not in a hurry to ease the export ban, another source said.
To control the upward price when banning wheat exports on May 13, the government made it clear that supplies backed by LCs issued before the ban was announced would be approved. In addition, officials stressed that India would meet the real needs of neighboring countries and food-deficient countries through a government-to-government agreement and honor the supply commitments already made.
Subsequently, the Ministry of Commerce partially relaxed the order and allowed the shipment of wheat consignments that were either handed over to the customs authorities for examination or registered in their system by 13 May. This relaxation was projected to facilitate clearance of about 0.35 metric tons of wheat, above the initial expectation of another 0.4 metric tons of LC-backed exports. It will still be approximately one-third of the estimated 2-2.2 metric tons at various ports or transits. About 20 lakh tonnes of wheat has been exported in the current financial year before the ban was imposed on May 13.
The embargo surprised markets for the product, as it came just weeks after the government set a target of exporting at least 10 metric tons of wheat to partially fill the void left by the conflict between Russia and Ukraine. However, the expected disaster of wheat harvest due to intense heat wave from late March forced the government to resort to sanctions.
Although the Ministry of Agriculture has now cut its forecast for 106 metric tons of wheat from 111 metric tons in June to February, analysts expect output to be much lower – about 90-95 metric tons.