Indian wheat is in demand globally, with the US seeking help to fill the international food shortage gap. However, the challenge for Indian exporters is to match international quality standards and fight decade-long World Trade Organisation (WTO) restrictions on the Indian cereal.
Quality concerns about Indian wheat
Last week, Egypt approved the import of Indian wheat — a big win for India which has languished in the list of major world exporters despite being the world’s second largest producer.
Egypt has been unable to meet its quota of wheat from Ukraine and Russia due to the ongoing war. So, it approved the import of 1 million tonne of wheat from India and would need 2,40,000 tonne of it in April itself. But the African nation has put in a lot of quality checks that Indian exporters will have to meet. Ahmed El Attar, head of the Egyptian Agricultural Quarantine, was quoted by media reports as saying the importers will have to submit a request for inspection of Indian wheat before shipment. As a consequence, India will have to modify the traditional and manual method of cleaning sand, dust and stones and adopt mechanisation which would pass international standards.
While it is a fact that WTO norms have been a roadblock in the way of exporting Indian wheat for all these years, it is also known that impurities in the grain and traditional methods of cleaning them have stopped local traders from finding suitable buyers internationally. Quality becomes an important criterion because it decides whether the cereal will be used for human consumption or as animal feed.
In the past, Karnal bunt disease, which affects flour quality, and overuse of pesticides in some regions had made Indian wheat less appealing in export markets.
The unusually high temperature prevailing in recent weeks is an additional reason for concern, since it tends to cause the wheat grain to shrivel.
But, why sudden spike in demand for Indian wheat?
Ukraine and Russia together produce 14 per cent of the world’s wheat. About 30 per cent of the world’s wheat exports originate from the two countries. With the two nations engaged in a war, the world is faced with an imminent food crisis, which needs alternative source of supply. About 25 countries are dependent on either Russia or Ukraine or both to meet anything between 50 per cent and 100 per cent of their wheat demand. With several counties still pandemic debt, the food shortage may spiral into another crisis.
It is obvious for the world to shift its attention towards India, which has huge wheat buffer stocks of its own though quality issues and international regulations prevail. Which is why when Egypt, a major importer of Russian wheat, approved wheat from India, it was a big draw.
India had been a relatively marginal player in global wheat trade until 2020-21. It could export only about 0.2 MT and 2 MT of wheat in 2019-20 and 2020-21, respectively.
The changing global dynamics, however, have worked in India’s favour with wheat exports increased to USD 1.74 billion in April-January 2021-22 as against USD 340.17 million in the same period last year. In 2019-20, wheat exports were worth USD 61.84 million, which rose to USD 549.67 million in 2020-21.
India accounts for less than 1 per cent of the world’s wheat export. However, its share has increased from 0.14 per cent in 2016 to 0.54 per cent in 2020. Notably, India is the second largest producer of wheat with a share of around 14.14 per cent of the world’s total production in 2020.
India produces around 107.59 million tonnes of wheat annually, with a major chunk of it going towards domestic consumption.
The WTO challenge
India, which have the potential to address the global food shortage by exporting agricultural products, in particular cereals, is facing difficulties from the WTO.
Union Finance Minister Nirmala Sitharaman raised India’s concerns at the annual Spring meeting of the International Monetary Fund and the World Bank recently. In response, WTO Director General Ngozi Okonjo-Iweala said that the organisation is looking at it very positively and hopefully it would be sorted.
“I hope we’ll break that decade-long restriction which has held us back from using our agricultural products after taking care of the buffer we need for food security purposes. So that the farmers also can get a better return,” Sitharaman said.
As per WTO rules, a country faces several restrictions in exporting grains from its official stocks if these have been procured from producers at a fixed price and not the market price. For example India cannot export wheat procured from farmers at minimum support price (MSP). Of course, the rule does not apply to traders who buy grains directly from farmers at market rates. In the case of India, the recent trend has been for farmers to sell their produce to traders instead of the government. Thus, the WTO norms may fail to block a bulk of export of Indian wheat this time.