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India's Wheat Diplomacy: Trade Turns Political?

Egypt also barred the entry of a ship carrying 55,000 tonnes of Indian wheat. However, the Egyptian plant quarantine chief Ahmed El Attar said that it was originally intended for Turkey

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India's wheat diplomacy took another turn as wheat consignment was rejected by Turkey on phytosanitary grounds at the end of May. The move, which created a stir across the nation, is reportedly more because of political reasons.  

Phytosanitary grounds is related to related to the health of plants, especially with respect to the requirements of international trade.

However, according to the media reports, the consignment was not exported directly from India but ITC, an Indian conglomerate company sold it to a Netherlands-based trading house.

ITC sold it to a Dutch company on a Free on Board (FOB) premise, which thus sold it to a Turkish firm. Both ITC and the Dutch firm have received the payments, a leading media house quoted an ITC official. 

"Turkey has of late been a vocal opponent of revocation of Article 370 and also opposed India’s entry into the nuclear suppliers' group. In India too, we recently saw opposition to the Tata group's potential appointment of a Turkish national as the CEO of the newly taken over Air India," said Akshay D'Souza, Chief of Growth and Insights, Bizom, a retail intelligence platform. 

D'Souza added that it does seem that either these political considerations or maybe a commercially more beneficial deal was made available to them at that moment. 

"This could have led to phytosanitary grounds for them to reject wheat sourced from an intermediary that was supplied, quality tested and approved and only then shipped by an Indian company," D'Souza said. 

Recently, Egypt also barred the entry of a ship carrying 55,000 tonnes of Indian wheat. However, the Egyptian plant quarantine chief Ahmed El Attar said that it was originally intended for Turkey. 

"We rejected the ship before it entered Egypt," he told news agency Reuters and added that Turkish quarantine authorities had already blocked the arrival of the consignment.

The Turkish Ministry of Agriculture and Forestry detected Rubella disease in rejected 56,877 tonnes of Durum wheat. Notably, the shipments had taken place prior to India's ban on wheat exports from May 13. 

D'Souza also said that from media reports, it does seem like this trade resulted from a pre-ban announcement trade of an Indian company to an intermediary who then sold this further to Turkey. Importantly, this seems like it was without direct government-government trade. 

"In the case of rejection of India’s wheat, it does seem like the consignment had gone through multiple quality checks and it also passed these checks before it was sold FoB to an intermediate agency," D'Souza added. 

Earlier, Commerce and Industry Minister Piyush Goyal said that Egypt, one of the largest importers of wheat from Ukraine and Russia, has approved India as a wheat supplier.

A day before the ban, the Ministry of Commerce and Industry said that the government will send trade delegations to Morocco, Tunisia, Indonesia, Philippines, Thailand, Vietnam, Turkey, Algeria and Lebanon to explore possibilities of boosting wheat exports from India. 

It said that India has set a target of a record 10 million tonnes of wheat in 2022-23 amid rising global demand for grain. However, the sudden move of the ban raised many eyebrows across the spectrum. 

According to the experts, oftentimes, countries utilize trade and non-trade barriers to alter trade deficit/surplus depending on the price and quality of alternate sources of supply available. Balancing political relations with the internal needs of countries often becomes a balancing act that trade and commerce arms of government try to manage. 

Meanwhile, the United Nations' food agency has said that exceptions to India's wheat export ban - for earlier contractual commitments, government-to-government sales and food security purposes - are estimated to support an export forecast of 7 million tonnes from 2022 to 23. The number is above the export average over the past five years. 

Also, the Directorate General of Foreign Trade May has directed regional authorities to physically verify all documents of applicants for the export of wheat before issuing registration certificates (RCs). 

According to the Ministry of Commerce and Industry, the order has been issued to ensure that the exporters are not issued RCs based on improper documents.

"In order to plug the loophole, it has been decided that regional authorities will do a physical verification of all letters of credit, whether already approved or under process," the statement read. 

Wherever necessary, the help of a professional agency may be taken for such verification. Validation, and endorsement by recipient bank to be ensured while doing physical verification, it added. 

"In cases where the LC date is on or prior to 13 May 2022 but the swift message, message exchange date between the Indian and foreign bank is after 13 May 2022, regional authorities may conduct a full investigation and if these are found to be antedated, immediate proceedings under FT (D&R) Act, 1992 to be initiated against the exporters," it read. 

The department said that such cases are to be further examined by referring to enforcement agencies like the Economic Offence Wing (EOW) and the Central Bureau of Investigation (CBI).

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