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The Directorate General of Foreign Trade has ordered physical verification of all documents of wheat exporters, and warned of action by the Economic Offenses Wing (EOW) or the Central Bureau of Investigation (CBI) if it found fraudulent letters of credit with traders amid the ban on wheat exports.
A commerce and industry ministry official told Mint that traders were taking advantage of high international wheat prices by using several unscrupulous means such as producing fake letters of credit. Another official said that the situation at ports has become very difficult to manage as traders have been trying to flout the wheat export ban.
Wheat prices soared to record levels after the disruption in exports from Russia-Ukraine. India’s wheat ban also pushed international prices of wheat higher.
“In order to plug the loophole, it has been decided that regional authorities will do a physical verification of all Letters of Credit, whether already approved or under process. Wherever necessary, the help of a professional agency may be taken for such verification," the department of commerce said in a statement on Monday.
The order has been issued to ensure that the exporters are not issued registration certificates based on improper documents, it added. According to the order, the validation or endorsement by the recipient bank has to be ensured while doing physical verification.
“In cases where the LC date is on or prior to 13 May but the swift message/message exchange date between the Indian and Foreign bank is after 13th May 2022, Regional Authorities may conduct a full investigation and if these are found to be antedated, immediate proceedings under FT (D&R) Act, 1992 to be initiated against the exporters," according to the order.
The government had on 13 May restricted wheat exports after heatwaves during the latter part of March, especially in northwest India impacted production. The government had to revise wheat production estimates, lowering it to 105 million tonnes this year against 111 million tonnes expected earlier.
Wheat prices had jumped nearly 20%, while the price of essential food items such as atta had risen nearly 15% last year.