New Delhi: India’s food ministry will oppose a proposal to export wheat as it prefers to distribute the excess to the poor within the country, K.V. Thomas, Union minister of state (independent charge) for consumer affairs, food and public distribution, said on Thursday.
“We want the wheat produced by our farmers to be distributed here first,” Thomas said, quashing expectations that wheat exports could be allowed soon.
Thomas said that the empowered group of ministers, which met earlier this month, has deferred a decision on lifting the ban on wheat exports.
Some reports had said the Congress-led United Progressive Alliance (UPA) has agreed in principle to allow wheat exports to reduce stocks.
“The government is distributing 5 million tonnes (mt) wheat to below poverty line (BPL) families, 5 mt to above poverty line (APL) families and another 5mt to the 150 poorest districts from the stocks,” the minister said. “We are also supplying extra wheat under the open market schemes to the states at the minimum support price (MSP) rates.”
Some officials in the government had said that the government could offer a subsidy to wheat exporters. But a senior official said it could only be a small one, and, therefore, wheat exports were not feasible given the current price differential between Indian and overseas wheat.
Instead, the government might consider allowing another 1 mt of rice to be exported as demand is strong in the international market at current prices, the same official said.
India’s domestic wheat prices are higher than international rates by around $100 (Rs 4,410) per tonne and exports can be possible only with the help of subsidies to the same extent, traders said.
Wheat is currently trading at around $244 per tonne in the Black Sea region, while Food Corporation of India (FCI) wheat at economic cost is at $359 per tonne, showing a gap of more than $100.
Economic cost is the price of the foodgrain plus transport, pilferage, storage and other charges built over the years. The current spot price of wheat and rice are slightly lower than FCI’s economic cost.
“I don’t think there is a possibility of wheat exports at the current rates. Black Sea region has come out with huge stocks as Russia and Ukraine have opened up wheat exports, so prices have fallen,” said Amit Takkar, president of Emmsons International Ltd, a commodity trading firm.
“The situation for wheat exports will be bleak even if a subsidy is given, as the news of the subsidy will make the foreign market lessen prices further,” said Mohammad Suhail of Al- Khair Exports.
FCI has rice and wheat stocks of 45.9 mt, as against a buffer norm plus strategic reserve requirement of 25 mt, its website shows. The surplus is the result of last three years’ build-up, owing to the government’s policy of conserving physical stocks.
A large amount of the stock lies in the open and with the rabi harvest of rice due in three months, the need to reduce old stocks is urgent. Yet, effective steps such as timely exports and buying of grain futures is still not seen as a priority in the government.
Traders said distributing the grain to the poor would come with its own challenges given the problems faced by the public distribution system.
The government allowed export of 1 mt of non-basmati rice on 11 July. Traders said rice exports had better prospects as Indian prices were lower than international rates. However, an official in the government said earlier this week that the Delhi high court had stayed quotas allocated to rice exporters by the Directorate General of Foreign Trade. Thai rice is around $555 per tonne, higher than the FCI economic cost of $477-489 per tonne.
Traders said wheat exports may also be difficult as India is returning to the foreign market after a gap of four years, while rice traders already have relationships with basmati buyers who are also interested in buying non-basmati varieties.
They said demand for Indian rice is good in the Middle East, South Africa and South Asia which is why many traders were keen to export.
“Those who have been exporting basmati rice have been getting lots of inquiries,” said Ashok Aggarwal of the Rice Millers’ Association.
Meanwhile, rice exporters are displeased with the government’s minimum export price (MEP) of $400 per tonne, which they say will push overseas clients to lower their bids to those levels.
“When others are selling at over $500 internationally, how come we are offering our rice at $400?” said Vijay Setia, president of the All India Rice Exporters’ Association, which has asked the government to revise the MEP. “It has given the world the impression that Indian rice is cheaper than $400.”