Government bans wheat exports after new estimate of low production, says need to ensure food availability

A day after announcing trade delegations were being sent to nine countries “to explore possibilities of boosting India’s wheat exports”, the government on Saturday banned all shipments of grain with immediate effect.

The export of all wheat, including high-protein durum and normal bread varieties, has been moved from the “free” category to the “prohibited” category.

Only two types of shipments will now be authorized: exports on the basis of authorizations granted by the Center to other countries “to meet their food security needs” and “at the request of their governments”; and contracted exports for which irrevocable letters of credit have already been issued “on or before the date of this notification, subject to presentation of the prescribed documentary evidence,” according to a Commerce Department notification.

The sudden and unexpected export ban comes even as government data on May 12 showed annual consumer price inflation hit a nearly eight-year high of 7.79% in April and retail food inflation had climbed to 8.38%. Controlling rising food inflation aside, the decision was apparently made in light of government agencies’ purchase of wheat which fell to its lowest level in 15 years, at just 18 million tonnes (mt ) purchased so far in the current marketing season, compared to the record of 43.3 Mt in 2021-22.
While the wheat marketing season technically runs from April to March, the bulk of minimum support price (MSP) government procurement takes place from April to mid-May.

Commerce Secretary BVR Subrahmanyam defended the ban, saying primacy was given to ensure “adequate food availability in the country”. The government, he said, is committed not only to India’s food security, but also that of “neighboring and other vulnerable developing countries”.

India’s wheat exports hit a record high of 7.22 tonnes worth $2.05 billion in the fiscal year ended March 31, 2022.

According to Subrahmanyam, almost half went to Bangladesh. “We have kept the window open for our neighbors and also for a large number of vulnerable countries facing real shortages if their governments request it,” he said.

In mid-February, the Ministry of Agriculture had estimated India’s 2021-22 wheat crop (marketed in 2022-23) at a record 111.32 tonnes. Based on this, the country’s wheat shipments were expected to be between 10 and 15 tonnes this fiscal year. On April 15, Trade and Industry Minister Piyush Goyal tweeted that Indian farmers “have ensured the overflow of our granaries and we are ready to serve the world”.

For the current financial year, it is estimated that 4.5 mt of exports have already been contracted, of which 1.46 mt were shipped in the month of April alone.

But these projections did not take into account yield losses due to the sudden rise in temperatures from mid-March, which impacted the standing wheat crop when it was in the crucial stage of dough “. This is when wheat kernels accumulate starch, protein and other dry matter, with peak temperatures ideally at the beginning of the 30 degree Celsius range to allow for optimal grain filling and gain in weight. With temperatures exceeding 35 degrees in mid-March and 40 degrees at the end of the month, this led to premature ripening and wilting of the grains.

Field reports from most parts of the country – with the exception of Madhya Pradesh where the crop is ready for harvest in mid-March – suggest wheat farmers are harvesting 15-20% less grain compared to last year. The Sunday Express has learned that the government’s own revised internal estimate of wheat production for 2021-22 is now 98 tonnes, the lowest since 2015-16’s 92.3 tonnes.

Agriculture Secretary Manoj Ahuja, however, maintained that yield losses are not that high and that “our production estimates (for now) are 105 to 106 tonnes”.

For the current financial year, it is estimated that 4.5 mt of exports have already been contracted, of which 1.46 mt were shipped in the month of April alone. It is unclear how much wheat has been exported through May 13 or would be covered by the transitional arrangements.

“The ban is an anti-farmer measure. If the government was so concerned about inflation, it could have gradually filtered exports rather than resorting to a knee-jerk ban. This could have taken the form of a minimum export price (below which shipments cannot take place) or a tariff,” said Ashok Gulati, a prominent agricultural economist.

The export ban could also force farmers, who have been holding back their harvest in anticipation of higher prices in the coming months, to sell to government agencies at the MSP.

“Government purchases have fallen mainly because farmers are getting higher prices by selling to private traders and exporters. If weak purchases and depletion of public stocks were a concern, what prevented the government from offering a bonus of Rs 200-250 on the MSP (from Rs 2,015 per quintal) to farmers? If you do this even now, the farmers will definitely bring you more wheat. The export ban is an implicit tax on farmers,” Gulati said.

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