From G7 nations to traders to farmers, India's wheat export ban has pleased none
After promising to help the world meet its food needs, India’s sudden U-turn to ban wheat export has hit several stakeholders in the export ecosystem amid a global crisis triggered by the Russia-Ukraine war
After promising to help the world meet its food needs, India’s sudden U-turn to ban wheat export has hit several stakeholders in the export ecosystem amid a global crisis triggered by the Russia-Ukraine war.
Even as experts argue for revoking the ban on the grounds of India having more than enough stocks that would last over a year, criticism has come from various corners, including Germany, as the ban came soon after New Delhi said it would send delegations to nine countries to discuss ramping up wheat exports to meet the shortage in the world basket caused by the war.
The government has, however, defended the move, saying it was to curb a possible rise in domestic prices of wheat due to a shortfall in production caused by an extreme heat wave that hit the country earlier than usual in March, affecting crop output.
As against 109 million tonnes produced last year, this year’s production is estimated to reach only 105 million tonnes.
After securing much of it for domestic schemes, the government had said it was planning to push wheat exports from around 7 million tonnes in 2021-22 to 10 million tonnes this year — just a day ahead of imposing the export ban.
Although India’s export is quite low compared to world’s top exporters, such as Russia, Canada, US, Australia and Ukraine, the ban is set to push up global prices, which had already surged due to the Russia-Ukraine war.
Agriculture ministers of the G7 grouping which met in Germany said such measures “would worsen the crisis” of rising commodity prices.
“If everyone starts to impose export restrictions or to close markets, that would worsen the crisis,” German Agriculture minister Cem Ozdemir was quoted as saying by news agency AFP. “We call on India to assume its responsibility as a G20 member.”
The Russian Union of Grain Exporters, that comprises companies that export 70 per cent of Russian-origin grain exports, said it had warned about India’s ambitious export targets, which do not reflect the real situation. “The anomalous heat did not leave them a chance. Now this fact has become official,” they said in a statement.
A senior economist in the US said that the ban could create issues for other South Asian nations like Bangladesh, which import a considerable amount of wheat from India.
Other experts feared a similar move from countries exporting other grains like rice. “If rice exporters panic (and there’s no reason thanks to a record expected harvest) and follow suit, it’s game over for global food security,” Javier Blas, Energy and commodities columnist at Bloomberg, wrote on Twitter.
This comes after Indonesia had earlier banned the export of palm oil, being its biggest producer, in order to curb domestic prices.
However, India has since softened its stance, allowing consignments that reached the Customs on or prior to May 13 — the day the ban set in — to be exported. The government is also looking to push government-to-government trade of wheat on need basis, and has already procured orders from Egypt and Turkey.
Traders want more
According to an Economic Times report, the Centre has asked Agricultural and Processed Food Products Export Development Authority (Apeda) to collect data from wheat exporters on how much of the cereal is being sold overseas. The government is also checking how much wheat exporters have now.
“This will help the government in deciding whether to continue with the export ban or introduce further relaxations,” the report said, quoting a source. It added that traders are expecting more relaxations in the coming weeks as international pressure to ease the ban persists.
Like India, wheat production in Canada, the European Union, the US and China too has been affected by the extreme heat. But since Indian wheat is cheapest, priced at $360 per tonne against $400 for Russian wheat and $458 for Australian wheat, it is in high demand this year although India’s exports in the past have been negligible compared to other exporter countries.
Double whammy for farmers
If India had continued to export, the benefit of the higher price would have also accrued to farmers, who are facing a double whammy. They have had poor output this year and the ban denies them the opportunity to take advantage of the Ukraine crisis to earn more.
India is the world’s second-biggest wheat producer after China but the farmers who produce wheat are largely small land-owners and earn a bare existence out of the crop cultivation.
While the price of wheat being procured at mandis (or storage facilities) had been ₹2,300 before the export ban, it has slumped to below ₹2,015, the minimum support price at which the government has promised to buy grain.
“This ban has come as a shock,” farmer Navtej Singh from Khanna, Punjab, told AFP. “The price has dropped to the lowest and doesn’t even cover our expenses. I can’t even wait for a day. The authorities had not consulted anyone and had acted “selfishly. We were already hit with production losses this year, and the ban order has made our life difficult.”
Although Prime Minister Narendra Modi last month offered to help “feed the world” by exporting more wheat, extreme weather conditions driven by climate change are creating a havoc on production.
Adding to the woes of the farmers, the government is cutting down on procurement of grains for the public distribution system (PDS).
Farmers had also protested against three controversial farm laws brought by the Centre that sought to force farmers to move to other grains. But relentless protests and the fear of adverse electoral outcome forced the government to withdraw the laws.
By imposing the ban, the government is looking to ensure food security for its mammoth population and keep prices from going north amid high inflation due to rise in fuel prices. Manish Pajni, head of the Punjab government’s grain procurement department in Khanna, told AFP that if there was no export ban, wholesale rates could have hit the roof.
Need regulated policy
But traders and analysts feel the government could have taken a phased approach as against an abrupt approach as small farmers are likely to bear much of the brunt.
AS Mittal, Assocham Northern Region Development Council, called for a regulated wheat export policy that would ensure farmers their share of profits.
As per the Department of Food and Public Distribution (DFPD), Indian storage has around 19 million tonnes of wheat stocks against a buffer requirement of 7.5 million tonnes and around 19.5 million tonnes are to be procured in 2022-23. With 30.5 million tonnes to be allocated for PDS and other welfare schemes, 8 million tonnes still remain in the granaries, Mittal wrote in BusinessLine.
As Ukraine and Russia are set to produce wheat only in August and September, amid uncertainty, and Australia’s is expected only in November, India has a huge opportunity to fill the world’s baskets, even if only in a minor way as Russia and Ukraine export 42 million and 24 million tonnes respectively, he said.
India may not be able to fill the gap left by Russia and Ukraine but it could develop a long term policy to bridge a part of the gap, he feels, which would also dispel negative perception held by the world about India’s export policy, which many see as protectionist.