NEW DELHI/KARACHI, June 8: High wheat prices in Pakistan will be a stumbling block in the country’s efforts to sell its surplus grain to India, and deals will materialise only if Islamabad takes steps to price export offers competitively.

After India resumed sugar exports to Pakistan last year, hopes have been mounting that some wheat from Pakistan, looking to export after more than two years, could move to India, which is in the market for the grain for the first time in six years.

But for that to happen, Pakistan will have to offer wheat at levels lower than Australia, which recently struck sales to India of around $187 a ton, including cost and freight.

Wheat in Pakistan is quoted around $173 a ton in the domestic market. At $35 per ton for storage and domestic transportation and $20 for freight charges, the landed cost in India will be around $228 per ton, traders said.

Traders in Pakistan said it would be unviable for them to directly export wheat to India without subsidies since their prices were relatively higher than world prices because of high input, storage and transportation costs.

A Pakistani government official said the Trading Corporation of Pakistan and the Pakistan Agriculture Storage and Services Corporation would most probably handle exports.

“The government will have to subsidise the grain by $68 per ton without freight to make it viable for export, which I don’t think the government would do,” said Abdul Majeed, a Karachi-based grains exporter.

Some traders are expecting domestic wheat prices in Pakistan could ease after the harvesting season ends, making it easier for some exports to materialise.

But even if domestic prices in Pakistan don’t fall below Australian prices, traders said there is still opportunity for some sales to India as small Indian millers keen to bring in quick cargoes might be eyeing Pakistani wheat.

This will help India meet some of its immediate needs. New Delhi is struggling to rein in domestic wheat prices as its stringent import conditions had made it difficult to seal deals for its import requirement of more than three million tons.

In addition, analysts said the quality of wheat grown in Pakistan is the same as in India’s leading grain-growing Punjab belt, making it easier for the country’s consumers to accept it.

“We are in touch with Indian trade and the government, and I don’t think we will miss this opportunity to export,” said a senior official at Pakistan’s food and agriculture ministry.

Farm officials estimate Pakistan can export about two million tons of wheat, with the country set to harvest 21.7 million tons from the current year’s crop. Pakistan, which annually consumes 22 million tons of wheat, also has carryover stocks of 2.1 million tons from last year’s crop.

Last year, Indian sugar exports to Pakistan finally took place after months of discussions between the two countries and lobbying by traders, who said it was profitable for Pakistan to bring in the sweetener from India at cheaper prices instead of paying higher prices for cargoes from far-off origins.

And traders expect the debate to open up the wheat trade between the neighbours won’t be any shorter.

“Buying from Pakistan is a political question,” said G. Chandrasekhar, commodities editor of the Hindu Business Line newspaper. “But it is not an untouchable and India should start talking to them.”

In addition to efforts to boost wheat and sugar trade, India wants to triple tea exports to Pakistan following a thaw in relations between the two South Asian rivals.

Some Pakistani traders said Islamabad could be interested in bartering its wheat for Indian sugar, which Pakistan is importing in large volumes.

But with India channelling its wheat imports through its government-run agency while sugar is exported by its private traders, it would be difficult to work out a barter deal soon, analysts said.

“I don’t think it will be commercially viable to buy from Pakistan,” said Vinod Kapoor, chairman of Wheat Products Promotion Society, an Indian trade body. “But nothing is impossible if both governments agree.”—Reuters