As wheat flour prices have risen by 20 percent on a yearly basis, the Indian government is set to cut import duties to ease the double-digit food inflation ahead of the four-month festive season beginning later in August.
On condition of anonymity, government officials and traders told Sputnik that the import duty on wheat would be scrapped from the current 40 percent if domestic prices do not follow global market trends.
"If prices do not come down in the next few days, definitely we will intervene," government sources said.
The authorities may also impose stock limits on wholesale suppliers, meaning they cannot hold wheat at their warehouse from a prescribed amount.
Food inflation, which has remained above 10 percent for months, has become a significant headache for the BJP-led federal government, which is facing assembly elections in several states, including Gujarat, Prime Minister Narendra Modi's home state.
India has witnessed a short production target of five million tons this year due to an unprecedented heatwave in March in the wheat producing states of Punjab, Haryana, and Uttar Pradesh.
Wheat procurement in the current season for the Central Pool (government) has been 18.79 million tons, which is 57 percent lower than the annual target.
Traders have been purchasing wheat in the open market, as they find better prices on the international market. India's wheat export earnings reached $1.19 billion between April-July 21 this year, compared with $2.1 billion for the entire year of 2021.
"The reasons for the increase include various factors like international demand-supply situation, rise in global commodity prices, higher domestic supply of wheat, conflict between major wheat exporting nations like Ukraine and Russia, etc.," Patel said.
As prices started increasing in the domestic market, the federal government prohibited the export of wheat to manage the country's overall food security. On a demand basis, India continued exports to vulnerable and neighboring countries facing food security issues.