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What explains India’s U-turn on wheat exports

Heatwaves in the latter part of March, especially in northwest India, have impacted production of foodgrains. Along with record retail inflation, it has punctured India’s export hopesPremium
Heatwaves in the latter part of March, especially in northwest India, have impacted production of foodgrains. Along with record retail inflation, it has punctured India’s export hopes

The Union commerce ministry was preparing to send delegations abroad to boost the country’s wheat exports, when the government abruptly banned its exports on 14 May. Mint explains the change of stance, and its implications.

The Union commerce ministry was preparing to send delegations abroad to boost the country’s wheat exports, when the government abruptly banned its exports on 14 May. Mint explains the change of stance, and its implications.

Why did India ban the export of wheat?

Heatwaves in the latter part of March, especially in northwest India, have impacted production of foodgrains. Along with record retail inflation, it has punctured India’s export hopes. While wheat prices are up nearly 20%, prices of essential food items such as atta have risen nearly 15% last year. Prices of other food items that use wheat, like bread and biscuits, have surged, too. Meanwhile, the government had to revise wheat production estimates for the year, lowering it to 105 million tonnes this year against 111 million tonnes expected earlier. Wheat production stood at 109 million tonnes last year.

Is the country staring at a food shortage?

Senior government officials have stated that India’s grain stocks are well above the buffer levels and the decision to regulate wheat exports was taken largely to check prices and curb hoarding. Food secretary Sudhanshu Pandey has said that the public distribution system in the country would be run smoothly. However, the government has replaced 55 lakh metric tonnes of wheat with rice in the Pradhan Mantri Garib Kalyan Yojana scheme for 2022-23. The effort clearly is a response to the reduced availability of wheat. Separately, the government has extended the wheat procurement season till 31 May.

Soaring prices
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Soaring prices

What has been the global reaction to the ban?

Agriculture ministers from G7 condemned India’s decision to withhold wheat exports amid a global grain shortage. India is the world’s second-largest wheat producer and was expected to fill the gap created because of the Ukraine war. However, wheat exports will be allowed in cases where an irrevocable letter of credit has already been issued.

How will the ban affect India’s neighbours?

The commerce ministry reasons that the “export control" will help India guide wheat trade in a certain direction. Even with the ban, there is a window open for neighbouring countries. The official notification issued by the commerce ministry stated that export will be allowed to other countries “based on the request of their governments". This window is crucial for Sri Lanka because the country is facing an economic crisis. Also, Bangladesh and Nepal have traditionally relied on Indian wheat.

What is the impact on farmers and traders?

The ban has deprived Indian wheat traders the opportunity to gain from the global grain shortage. It may have an unfavourable impact on wheat farmers too. Market prices of wheat had soared past the minimum support price (MSP) in recent months. While the purchase of wheat by private traders in Punjab jumped to 4.47 lakh metric tonnes, the highest in eight years, government wheat procurement from the state may not reach 100 lakh metric tonnes this year.

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