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Published on: Oct. 22, 2022, 2:21 p.m.
Wheat export boom
  • Should the government import wheat for replenishing public stocks?

By Rakesh Joshi. Executive Editor, Business India

Despite a ban of sorts, India exported double the quantity of wheat in the first five months of this financial year compared with the same period in 2021-22. India exported 4.35 million tonnes of wheat during April-August 2022-23, which was 116.7 per cent more than the exports in the corresponding months last year, according to Department of Commerce data.

Exports were boosted by the Russian invasion of Ukraine in late February, which led to a major spike in demand for Indian wheat. Exports in April touched 1.47 million tonnes, more than 500 per cent higher than the 242,000 tonnes exported in April last year. After the ban announced on 13 May, exports for that month fell to 1.08 million tonnes, which, however, was still 164 per cent higher than the 408,000 tonnes exported in May 2021.

The ban on wheat exports came amid a lower wheat output of 106 million tonnes, lower procurement (18.7 million tonnes compared to 43.3 million tonnes last year), and rising domestic prices. The lower output was dues o unseasonal heat waves triggered by climate change in March, which scorched swathes of the nascent crop. 

However, two kinds of shipments were allowed: exports based on permission granted by the Centre to other countries ‘to meet their food security needs’ and ‘on the request of their governments’; and contracted exports against which irrevocable letters of credit had already been issued.

For 2022-23, the government lowered wheat purchase down by 50 per cent of what was bought the previous year and the lowest in 13 years. Sudhanshu Pandey, Union food secretary, admitted that this sharp decline was due to huge buying by private players who saw an opportunity in exporting the product. India faced a similar situation during the 2008 global food crisis but managed to weather the storm due to the APMC food stock reserves.

The upshot of this development is that prices of wheat and wheat flour in the domestic market have increased significantly of late. Retail cereal inflation is at 11.5 per cent. Price data on the Department of Consumer Affairs website show the all-India daily average retail price of wheat flour at Rs36.23 per kg on 15 October, which was 18 per cent higher than the price a year ago (Rs30.7 per kg).

More alarmingly, there are reports that the public stocks are getting depleted. This is being attributed to the steady diversion of food grains to the free-grain Pradhan Mantri Garib Kalyan Anna Yojana scheme, which has now been extended till December.

Limited options

While rice stocks are comfortable, there is uncertainty over production in Uttar Pradesh, Bihar, Jharkhand and West Bengal. Even Punjab and Haryana have reported crop damage from incessant rains, the extent of which will be known only as the procurement season, already delayed, progresses. In short, the Food Corporation of India’s grain mountain has shrunk to levels where stocks are quite precarious.

  • The upshot of this development is that prices of wheat and wheat flour in the domestic market have increased significantly of late

The options for replenishing the wheat stocks are limited, as farmers are yet to commence wheat sowing and the next crop will not arrive in the mandis before late-March. Nor are imports commercially viable; the landed cost of even the cheapest wheat from Russia will be above Rs30 per kg. The only import that is possible today is on government account. There are suggestions that the government should import 2-3 million tonnes of wheat for replenishing public stocks and undertaking open market operations to keep a lid on prices. 

India exported wheat to 44 countries in April — the most (335,000 tonnes) to Bangladesh and the least to the UK (2,000 tonnes). The number of national export destinations fell to 31 in May (Bangladesh was again on top), and sharply thereafter following the ban. India exported wheat to 11 countries in June 2022, only five countries in July (Indonesia, Bangladesh, Korea, the UAE and Angola), and eight in August (Bangladesh, the UAE, Indonesia, Sri Lanka, Afghanistan, Malaysia, Taiwan and Bhutan).

Indonesia emerged as the top buyer of Indian wheat in the months after the ban. Of the 1.8 million tonnes of wheat exports in this period, about 7 million tonnes went to Indonesia. In the five-month period from April to August, Indonesia has been the No. 2 export destination for Indian wheat, after Bangladesh (806,000 tonnes and 1.11 million tonnes respectively).

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