In a move to control the spike in wheat prices domestically, India has banned wheat exports with immediate effect. The government’s notification issued to this effect stated that the decision has been taken “in order to manage the overall food security of the country and to support the needs of the neighbouring and other vulnerable countries”.
The government, however, clarified that, henceforth, exports will be allowed based on permission granted to other countries to meet their food security needs and based on the request of their government.
Agri players have hailed the decision of allowing the need-based exports at the request of ‘vulnerable’ nations. Describing the rationale of the government’s decision, Fauzan Alavi, director of Allana Group, India’s largest wheat exporter, said, the “Nation comes first” at this juncture.
Other industry stakeholders echoed a similar view. Welcoming the government’s move, Ajay Sahai, DG & CEO of the Federation of Indian Export Organisations (FIEO) stressed that in terms of agri commodities, one has to take a very ‘close call’ between domestic consumption and exports. “This is a step in the right direction by the government, particularly when wheat production was expected to take a hit and prices would inevitably go up. There will be more availability of wheat in the domestic market now with supply side augmenting it. It is the poor man’s staple,” Sahai added. “However, if anyone has a Letter of Credit, that export order will be honoured. If someone has placed an order through the Letter of Credit where the shipment has not taken place, that shipment will also be allowed to take place in the current scenario.”
Russia and Ukraine, together, account for 30% of world wheat exports. Since the Russia-Ukraine conflict began in late February, India, the world’s second largest wheat producer after China, has emerged as the leading supplier of wheat to several global destinations.
With wheat supplies from the Black Sea region drying up, Indian agri players made hay out of the sharp uptick in the wheat demand. According to estimates by the Directorate General of Foreign Trade, India has exported a record 7 million tonnes (MT) of wheat in 2021-22, valued at $ 2.05 billion. Out of the total shipment, around 50% of wheat was exported to Bangladesh in the last fiscal. Recently, Egypt, which used to earlier import over 70% of its wheat demand from Ukraine and Russia, signed a major contract to source wheat from India.
Notably, on 12th May, an official communique by the government stated that it’s sending trade delegations to nine countries–Morocco, Tunisia, Indonesia, Philippines, Thailand, Vietnam, Turkey, Algeria and Lebanon– “for exploring possibilities of boosting wheat exports from India”. Coming just after two days, the government’s latest decision banning wheat exports has come as a sort of policy climbdown for many agri players. It’s noteworthy that losses to standing wheat crops in several parts of the wheat-producing states were quite significant this season. And the government’s export targets might not have adequately factored in the magnitude of the blow due to this, say industry observers.
Aditya Garg, Director, Vi Exports India Pvt Ltd., cautioned that about 2 million tonnes of export shipments on a monthly basis will come to a sudden halt due to the latest ban. “This is a big quantity when seen in terms of monthly shipments. A large part of this -about 1.3 to 1.4 MT, was being shipped via Kandla Port, alone. While the decision could be seen as a blow to exporters, it would boost the domestic market, leading to reduced inflation fears. Right now, wheat prices are at Rs 25750 per quintal at Kandla port. This will see a 15-20% jump in the next 20 days. We expect it to touch Rs 28000 per quintal in the next few weeks as there are buyers willing to even pay higher prices for wheat,” he said.
Garg further predicts a jump of 20—25% in the demand for wheat in international markets, effectively raising a possibility of a ‘looming agri crises’ soon. In his view, another impact of reduced wheat supplies in global marketplaces would have a knock-on effect, which would lead to spike in the prices of cereals like rice and millets, including pearl millet (bajra), foxtail millet (kangni), sorghum (jowar), finger millet (ragi), etc) since these commodities are an alternative to wheat for a large population.
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