India likely to export at least 5 lakh tonnes of wheat to Bangladesh

India is likely to clear exports of one million tonnes of wheat, in the first phase after it restricted shipments of the food grain, Economic Times reports, adding that at least half the quantity is likely to come to Bangladesh.

Citing trade sources, the report said the decision is expected to be announced after India’s commerce minister Piyush Goyal returns from Davos, where he is attending the World Economic Forum.

The Indian government on May 13 banned exports of wheat amid accelerating inflation but exempted shipments under contracts where letters of credit (LCs) had already been opened. The clearance for the shipment is expected under this exemption, they said.

The Director General of Foreign Trade (DGFT) has put up a file before the food ministry after scrutinising the LCs issued on or before May 13, the sources said.

It was found that many companies had opened back-dated LCs, and the DGFT has weeded out such applications and compiled a list of genuine LCs to be approved by the commerce minister, they added.

"It is learnt that the DGFT has asked for approval of more than 1 million tonnes of export in the first phase against genuine LCs, about 5,00,000-6,00,000 tonnes of which is expected to be for Bangladesh," the report said quoting a wheat exporter.

Trade sources said more than 250 railway indents had been booked as of May 13 for the export of wheat to Bangladesh. At 2,450 tonnes of wheat per rake, these can carry about 6,00,000 tonnes. Also, ten railway rakes loaded with grain have been stranded since May 13, when the ban was announced.

About 2,00,000 tonnes of wheat is expected to be exported by road, while the rest may be shipped by vessels, including to other destinations.

Traders said Bangladesh was not in a hurry to import Indian wheat as it had limited storage capacity. "Bangladesh will have to first sell rice from its warehouses to make space for imported wheat," said a Kolkata-based exporter.

Currently, Bangladesh is unloading a shipment from Australia at Chittagong port. As other origins are much more expensive than Indian wheat, Bangladesh is keen on getting Indian wheat.

Bangladesh may also later approach India under government-to-government trade, seeking wheat for its buffer stock, said exporters.

After the government banned wheat exports, many MNCs and big trade houses have started opening letters of credit (LCs) for rice exports, said trade sources.

"The government is terribly worried about food inflation. Due to the experience about LC clauses in wheat exports, all the major rice exporters have opened LCs," said a Delhi-based exporter, who did not want to be identified.

Despite rumours that the government may ban rice exports, exporters themselves are optimistic that such a decision may not be needed.