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Inflation Impact: India Bans Wheat Exports With Immediate Effect

The prices of wheat and atta have increased sharply as India has hiked exports of the cereal following a nearly 40 per cent rally in global rates amid the ongoing war between Russia and Ukraine

Photo Credit : Reuters

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As prices of commodities soar in the country, India has prohibited wheat exports with immediate effect to cool down local prices.

According to a government notification late on Friday, the step has been taken to manage the overall food security in India and support neighbouring and vulnerable countries.

However, exports will be permitted on the basis of permission granted to other countries to fulfil their food security requirements and based on the request of their government. Also, shipments of wheat are allowed for letters of credit that have already been issued.

Last month, 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.

The prices of wheat and atta have increased sharply in India as it has hiked cereal exports following a nearly 40 per cent rally in global rates amid the ongoing war between Russia and Ukraine.

In 2022, traders' wheat production is at 95 million tonnes (mt), against the centre's estimates of 105 mt. Talking the minimum support price (MSP) for wheat procurement, it stands at Rs 2,015 per quintal. 

Also, retail inflation in wheat and atta increased to 9.59 per cent in April and wheat procurement by the government has decreased by approximately 55 per cent as open market prices are higher than MSP.

With disturbance in the Black Sea region due to the war that resulted in the supply chain disruptions, India has tried to fill the vacuum. Several people are raising concerns about a possible wheat crisis in India.

However, experts told BW Businessworld that India would not face a wheat crisis. Experts mentioned that the existing buffer stocks for wheat are 2.5 times the buffer norms of 2021-22. Therefore, a hike in demand due to export will not squeeze the availability of wheat for domestic supplies. 

Apart from that, the expected wheat procurement during this Rabi season is also estimated to be 100 MMT.

India is also witnessing the worst heat waves, and hundreds of acres of wheat crops were destroyed, resulting in yields potentially declining by as much as 50 per cent in some parts.

"India may not be staring at a wheat crisis just yet, but given the heat-wave conditions we are grappling with now, it does bring about a real fear of reduced yields, as it has been the case for a couple of years," said Amarnath Halember, Executive Director and CEO, NextG Apex India told BW earlier.

For farmers, weaker production means reduced income and lower margins even as they deal with rising fuel and fertiliser costs, said Halember. 

Meanwhile, Secretary, Department of Food and Public Distribution (DFPD), Sudhanshu Pandey, said that India has a comfortable food situation with an overall surplus availability of grains and stocks expected to be higher than the minimum requirement for the next year. 

Addressing a press conference, Pandey said that after meeting the requirement of welfare schemes in the year ahead, on April 1, 2023, India would have stocks of 80 LMT of wheat, well above the minimum requirement of 75 LMT. 

He said India would have surplus wheat even though production was expected to be 1050 LMT, slightly lower than the initial estimate of 1110 LMT in FY 23.

Responding to a question on lower wheat procurement, Pandey said that due to higher market prices, large quantities of wheat were being bought by traders at a higher rate than the minimum support price (MSP), which was good for the farmers. 

"This year, due to an increase in market prices and higher demand by the private players both for domestic and export purposes, the purchase by the government agency is less. But that goes in favour of the farmers, and farmers are getting a good price for the wheat," Pandey said.


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