Wheat export ban: Govt tightens norms to curb frauds

The central government has come up with stricter norms to obtain registration certificates (RCs) for wheat exports to stop fraudulent practices by shady exporters. The commerce ministry's foreign trade wing Director General of Foreign Trade (DGFT) says in its latest observation it has been found that some exporters are applying for RCs using "improper documents", and there's a need for "more checks".

The observation comes after the DGFT on May 19 published guidelines for regional authorities to process applications that adhere to the laid out norms while issuing RCs to exporters.

The latest DGFT guidelines say that to plug the loopholes, registration authorities (RAs) will do a physical verification of all the letters of credits (LCs), whether already approved or under process. For that, they can take the help of a procession agency. “While doing physical verification, validation or endorsement by recipient banks may be ensured," it says.

In cases where the letter of credit date is on or prior to May 13, but a swift message exchange date between the Indian and foreign bank is after May 15, RAs can conduct a full investigation. If these are found to be ante-dated, immediate proceedings will be taken against the exporter, the DGFT order says.

Such cases will be further examined by referring to enforcement agencies like the Economic Offence Wing (EoW), and the Central Bureau of Investigation (CBI). In case of the complicity of any banker in cases where ante-dating is established, necessary proceedings will be initiated, says the ministry wing.

"Henceforth, all RC applications found eligible for approval after physical verification of the LCs by the RAs would be sent to a 2-member committee of additional DGFTs constituted for further checking and approval. After approval, the concerned RA will issue RC to the exporter,” says the DGFT order.

The government, on May 13, restricted wheat exports to manage the overall food security situation in India. The decision was also taken to support the needs of neighbouring and vulnerable countries adversely affected by the sudden changes in the global market for wheat and those unable to access adequate wheat supplies.

Relaxing norms a bit, the Centre on May 17 clarified that export curbs on wheat will not apply to consignments that have been handed over to customs for examination and have been registered into their systems on or before May 13.

The government also allowed a wheat shipment headed for Egypt, which was already under loading at the Kandla port. The decision to ease restrictions was taken after reports said 1.8 million tonnes of wheat grains were stuck at various ports after the Centre's restrictions.

To facilitate the registration of irrevocable commercial letter of credit (ICLR), opened on or before May 13, with regional authorities of DGFT, an online submission module was started. Accordingly, exports could apply for RCs by logging in on the DGFT website; no manual application was allowed.

However, the DGFT found some shady exporters were submitting false backdate letters of credits with the date of issuance on or before May 13 to get the compulsory RC, thus making them eligible for the wheat export despite the restrictions in place. The ministry wing has requested RAs to now process all such applications with due diligence and in compliance with the instructions.