India has been snapping up wheat from world markets to rein in domestic prices and boost supplies, but its efforts could backfire unless purchases are planned more in advance and with more discretion.

When India started importing wheat early this year after a gap of six years, it hoped domestic prices would ease and help consumers get one of the most basic staples at affordable prices.

But the purchases have done little to cap prices. On the contrary, local wheat prices have flared up more than 30 percent to 10,500 rupees, or $228, a tonne in the past six months.

Analysts said India needs to be secretive in its purchases if it wants to bring in the grain from overseas at competitive levels. Each time India has announced its plan to enter the market, world prices have shot up, costing the country dearly.

"China buys all kinds of commodities but no one seems to know about it until the purchases are over," said Vinod Kapoor, chairman of the Wheat Products Promotion Society.

India has already bought a whopping 5.5 million tonnes at exorbitant prices since the beginning of this year. Analysts say India might need to depend on imports for at least one more year as the country's output could fall on erratic weather.

New Delhi also permitted private companies to import the grain duty free earlier this month to prevent prices from surging from November when consumption normally peaks.

Traders and the U.S. agriculture attache officials estimate India might need to buy another 2-2.5 million tonnes of the grain in the year ending June 2007.

"India has turned the market bullish and is bound to keep it so for a while," said Gnanasekar Thiagarajan, director, Commtrendz Research. "We should have done the purchases discreetly. You cannot go about it madly and buy at all levels."

Wheat futures on the Chicago Board of Trade are flirting with the $4 per bushel mark -- up nearly 10 percent over a year ago -- caused by dwindling stockpiles after harsh weather shrivelled crop yields in the leading wheat producing nations.

EYE ON CROP

Analysts said India might not buy more cargoes immediately and would decide on purchases only after assessing domestic prices in December and the size of the next crop to be harvested in April.

India's sudden announcement this year that it would buy large quantities surprised the market as previously New Delhi kept on saying there was no need to import.

The State Trading Corporation on Saturday struck deals to buy 1.67 million tonnes of wheat at an average price of $229 per tonne, including cost and freight, about 30 percent more than what it paid for purchases in March.

The corporation floated its first wheat tender in February for 500,000 tonnes, signalling only a minor shortfall. But then they came out with a 3 million tonne import tender, catching markets by surprise and aiding a bull run in wheat prices.

D.P. Singh, Chairman of the All India Grain Exporters' Association, said the spike in global wheat prices was expected as the government had not set a clear policy for imports. "This was expected. The government was working at a snail's pace but the market does not wait for this kind of speed."

He said plenty of wheat could have come in around $180 a tonne and stabilised prices if the government had decided to allow imports free of duty four months ago.

"Once exporters know that the demand is high, they will squeeze the market up," Thiagarajan said.

Analysts said the government had no scientific method of accessing the crop, which makes it difficult to forecast the actual output accurately and decide on buying plans early.

The government initially gave an estimate of 74 million tonnes for the wheat crop in the current year but ended up saying that the country would harvest just 69 million tonnes.

It fixed a target of 16.2 million tonnes of wheat procurement but could garner only about 9 million tonnes from farmers.

Traders said the new crop would be either close to this year's output or lower because of less rains in growing states of Punjab, Haryana and Uttar Pradesh.

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