The government has ordered physical verifications of all documents to ensure strict compliance with the curbs on wheat exports.
In an order issued on Tuesday, the Directorate General of Foreign Trade has directed Regional Authorities to physically verify all documents of applicants for export of wheat before issuing Registration Certificates (RCs).
On May 13, India banned the export of wheat in light of a much lower-than-forecast wheat harvest, and spiralling inflation. However, it had allowed exports against valid irrevocable Letters of Credits (LC) issued on or before that date as a transitional arrangement. Since then, exporters have been moving the commerce department for approval to wheat export registration process.
A letter of credit is issued by one bank to another, especially one in a different country, to serve as a guarantee for payments. It is used extensively in global trade where most shipments are sent off based on the legal backing of the LCs. Export LCs serve as contractual agreements on the part of the issuing bank, on behalf of an importer, promising to pay the beneficiary or exporter provided conditions specified in the LC have been satisfied.
The latest order has been issued to ensure that the exporters are not issued RCs based on improper documents. "In order to plug the loophole, it has been decided that Regional Authorites will do a physical verification of all LCs, whether already approved or under process," the government said in the order. Wherever necessary, help of a professional agency may be taken for such verification, it adds.
The latest move comes after the Centre last week warned it will take all necessary action against those banks which are found complicit with exporters in issuing post-dated LCs. It had said some exporters are applying for registration certificates from regional authorities based on improper documents.
The latest order lays down a series of further checks such as validation or endorsement by recipient bank to be ensured while doing physical verification. "In cases where the LC date is on or prior to 13th May 2022 but the SWIFT message / message exchange date between the Indian and Foreign bank is after May 13, 2022, the regional authorities may conduct full investigation and if these are found to be ante–dated, immediate proceedings under FT (D&R) Act, 1992 to be initiated against the exporters," the order said.
Such cases will be further examined for being referred to enforcement agencies like the Economic Offence Wing (EOW) or Central Bureau of Investigation (CBI), the order said. In case of complicity of any Banker in cases where ante-dating is established, necessary proceedings as per law will be initiated, it warned.New Delhi has also permitted the export of the grain on a government to government basis to other nations on their request. This was done in order to counter the spiralling global food crisis which has seen a drop in wheat output in many nations even as prime producers Russia and Ukraine remain mired in war.