Just a day after its data showed annual consumer price inflation hitting a near eight-year-high of 7.79 per cent in April and retail food inflation surging even higher to 8.38 per cent, the Narendra Modi government has banned export of all wheat from the country .
Export of all wheat, including high-protein durum and normal soft bread varieties, have been moved from “free” to the “prohibited” category with effect from May 13.
Two kinds of shipments will henceforth be allowed. The first is “on the basis of permission granted by the Government of India to other countries to meet their food security needs and based on the request of their governments”. The second is exports under transitional arrangements, where irrevocable letters of credit have been issued “on or before the date of this notification, subject to submission of documentary evidence as prescribed,” a late Friday department of commerce notification stated.
The export ban comes even as procurement of wheat by government agencies has plunged to to 15-year-low, with only 18 million tonnes (mt) bought so far in the current marketing season, as against the record 43.3 mt in 2021-22. While the wheat marketing season technically extends from April to March, the bulk of government procurement at its minimum support price (MSP) happens from April till mid-May.
India’s wheat exports topped an all-time-high of 7 mt valued at $2.05 billion in the fiscal ended March 31, 2022. In mid-February, the Agriculture Ministry estimated the country’s 2021-22 wheat crop (marketed in 2022-23) at to record 111.3 mt. Based on that, it was expected that India’s wheat shipments would be anywhere from 10 mt to 15 mt this fiscal. Commerce and Industry Minister Piyush Goyal, on April 15, tweeted that Indian farmers “have ensured our granaries overflow & we are ready to serve the world”.
The department of commerce, interestingly, only on Thursday, had issued a press release regarding the Center 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” (https://bit.ly/3l6ejmN). The fact that the export ban notification came just a day later shows how quick the about-turn has been.
The government’s original export projections did not factor in the yield losses from the sudden spike in temperatures from mid-March, which impacted the standing wheat crop when it was in the crucial “dough” stage. This is the time when the wheat kernels accumulate starch, protein and other dry matter, with maximum temperatures ideally in the early 30 degrees Celsius range to allow optimal grain filling and weight gain. But temperatures crossing 35 degrees in mid-March and 40 degrees by the month-end resulted in premature ripening and shriveling of the grains.
Ground reports in most parts of the country – barring Madhya Pradesh, where the crop is ready for harvesting by mid-March – suggest wheat farmers harvested 15-20 per cent less grain compared to last year. The Indian Express has learned that the government’s own internal revised estimate of wheat production for 2021-22 is now 95 mt, the lowest since the 92.3 mt of 2015-16.
For the current fiscal, about 4.5 mt of exports have already been contracted. Out of that, some 1.5 mt was shipped out in April. It’s not clear how much wheat got exported in the current month till the ban came into effect or the quantities that would get covered under the transitional arrangements.
“It is an anti-farmer move in the name of the so-called poor consumer. If the government was so bothered 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 leading agriculture economist and columnist for The Indian Express.
The export ban may also force farmers, who have held back their crop in anticipation of prices rising in the months ahead, to sell to government agencies at the MSP. “Government procurement has failed mainly because farmers are getting higher prices by selling to private traders and exporters. If low procurement and depleting public stocks were a concern, what stopped the government from offering a Rs 200-250 bonus over the MSP (of Rs 2,015 per quintal) to farmers? If you do that even now, farmers will definitely bring more wheat to you. The ban on exports is an implicit tax on farmers,” added Gulati.
The department of commerce notification defended the ban by citing “a sudden spike in the global prices of wheat arising out of many factors, as a result of which the food security of India, neighboring and other vulnerable countries is at risk”.
It also sought to deflect likely criticism over the about-turn in policy – from claiming to be able to “feed the world” in the wake to the Russia-Ukraine war, to stopping all shipments overnight – by reiterating the government’s commitment “to providing for the food security requirements of India, neighboring and other vulnerable developing countries which are adversely affected by the sudden changes in the global market for wheat and are unable to access adequate wheat supplies”.