India Intelligence Report

   Govt may Scrap AWB Deal


Confronted with sub-quality wheat arriving from the Australian Wheat Board (AWB) and its refusal to supply human-consumable quality wheat at the agreed price, the Government may cancel the deal and negotiate a new one in more transparent terms. In a hurriedly released tender, India had ordered 4.5 million tons of wheat from the AWB at a “low” price of USD 179 per ton which has been questioned by the US wheat and federal grain inspectors.

Initial reports of the quality of the wheat received have been appalling. However, a Government owned laboratory in Mysore under the Health Ministry has approved the wheat with many caveats, nuances, and disclaimers. Given the controversy, it would follow that the Government will test the wheat internationally and by independent labs to get a handle on what it is going to distribute to millions of people. Although the import of wheat is a food security issue, the consumption and health is a food quality issue and has to be funneled through the Health Ministry.

Conventional wisdom is that an unusually low price would govern the paradigm “you get what you pay for.” However, this is not some small vendor and it is not a small deal. Hence, given the size, nature, and sensitivity of the deal, the quality, transparency, and process is lacking.

Analysts say that India has multiple options. It can call off the deal and negotiate a new one with a more transparent process or call off the deal and renegotiate the same price with lower quality standards. The second one should be rejected outright because an acceptance of such bad quality wheat will send the wrong message to prospective vendor’s world over who may use the country as a dumping ground for rejects. There is already a controversy over how Monsanto is adopting monopolistic practices  for its bio-technology altered cotton seeds. In another deal, Chinese telecom maker Huwawei Technologies wiggled out of a deal  with the Bharat Sanchar Nigam Limited (BSNL) with impunity. Iran reneged on its deal to supply large quantities of LNG deal and India has not pursued any punitive options. Given this pattern, if the country does not stand up to such unethical practices, it seriously jeopardizes future deals.

AWB has a horrible record of being unscrupulous. In the 1998 wheat import deal during I.K. Gujaral’s Government, there are allegations that it paid USD 2.5 million kickbacks on the USD 269 million deal to a numbered account in Cayman Islands. Farmer organizer Shetkari Sanghathana rightfully said “our farmers may have lower productivity, but the produce is relatively better quality and safer.”

The right approach is to threaten AWB with a ban on for several decades to bid for tenders in India if it does not meet the tender requirements as quoted. If AWB walks away from the deal, AWB must be banned from any Indian deals.