* Removal of 10 pct duty takes immediate effect
* Imports could jump to 5 mln T in 2016/17 - traders
* Droughts in 2014, 2015 led to stock drawdown
* Duty cut throws govt's wheat output estimate in doubt (Adds import estimates, analyst comments)
By Mayank Bhardwaj and Rajendra Jadhav
NEW DELHI/MUMBAI, Dec 8 (Reuters) - India on Thursday scrapped its 10 percent import duty on wheat after droughts in the past two years depleted stocks and raised prices, a move that traders said could lift overseas purchases to their highest in a decade.
The removal of the import duty comes after local wheat prices NWTc1 hit a record high last month, and should help private traders such as Cargill CARG.UL , Louis Dreyfus AKIRAU.UL and Glencore GLEN.L increase purchases.
Finance Minister Arun Jaitley told parliament the latest cut was effective immediately with no end date. Traders in Mumbai said India could import as much as 5 million tonnes of wheat this fiscal year ending March 31, the highest since 6.7 million tonnes arrived in 2006/07.
"Supplies from local crop will start rising only from April onwards and there was risk of prices rising (further) due to thin supplies," said Harish Galipelli, head of commodities and currencies at Inditrade Derivatives and Commodities.
"The government wants to keep inflation under control ahead of elections in key states like Uttar Pradesh (next year)."
Private players have imported about 2 million tonnes of wheat from Australia and Ukraine so far this fiscal year. At India's southern ports, Australian wheat is available at $235 per tonne, nearly 20 percent cheaper than local supplies, said a Mumbai-based dealer with a global trading firm.
'PURE MYTH'
The duty cuts have raised doubts about the government's wheat production estimates.
Traders say output in the last two crop years has fallen well below the peak of 2013/2014, reducing stocks to the lowest level in nearly a decade and inflating domestic prices. announcement comes a month after the government, in a shock crackdown against the shadow economy, scrapped high-value banknotes that accounted for 86 percent of cash in circulation.
Farmers have complained that the move made it hard for them to buy seeds and fertilisers, disrupting the planting of winter crops. Government officials say that planting is ahead of schedule but have also taken steps to boost credit to farmers. farm ministry pegged wheat output for 2015/16 crop year at 93.50 million tonnes in a final estimate, up from 86.53 million tonnes a year ago, but most traders saw substantially lower production.
"(The duty cuts) clearly validate the fact the agriculture ministry's production estimate of 93 million-94 million tonnes was just a myth," said Tejinder Narang, a trade analyst in New Delhi. "Pure myth."
A farm ministry spokesman could not immediately be reached for comment.
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