The current ban on wheat exports from India is a dire need for ensuring adequate availability and curbing soaring prices. Due to the onset of severe heat waves this summer and a sharp rise in global prices, India's wheat prices are in a hot spot. To ensure food security in the country, the government has announced prohibitions on wheat exports. However, under special conditions, the export of this item will be allowed.
With immediate effect, the government amended the Wheat Export Policy and added a 'Prohibited' term on wheat from their previous 'Free' term.
In a statement, the Ministry of Commerce and Industry said, "there is a sudden spike in the global prices of wheat arising out of many factors, as a result of which the food security of India, neighbouring and other vulnerable countries is at risk."
It added, "the Government of India is committed to providing for the food security requirements of India, neighbouring and other vulnerable developing countries which are adversely affected by the sudden changes in the global market for wheat and are unable to access adequate wheat supplies."
India is looking to export 10 million tonnes of wheat in 2022-23. The exports had increased to 7 million tonnes worth around $2.05 billion in the financial year FY22 driven by strong demand.
Talking about the wheat export ban, Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "The Government's goal of exporting 10 million of wheat in FY 23 capitalizing on the sharp increase in global prices was well-conceived."
Sudhanshu Pandey, Secretary Department of Food and Public Distribution on Saturday said that the country has adequate food stocks. He added that after consulting with the states, the Centre has reallocated some quantities by changing the ratios of wheat and rice. For example, states getting wheat and rice in the ratio of 60:40 will get it in the ratio of 40:60. Similarly, the ratio of 75:25 is made 60:40. Where rice allocation was zero, they will continue to get wheat. For all small states-NE states and special category states, the allocation has not been changed.
Pandey said, "With this, we have boosted the availability of wheat to about 110-111 LMT more. Adding it to 185 LMT, it becomes 296 LMT which is almost as last year’s."
On the heat waves' impact, Manoj Ahuja, Agriculture Secretary said heatwaves had affected wheat crops, especially in North-Western India this year, but the difference is in availability compared to last year is marginal.
Ahuja added, "Last year the production figures of wheat were 109 LMT for the country. This year in February, we have come out with advanced estimates for this year’s production and we have estimated 111 LMT. Our estimates shows 105-106 LMT of wheat availability this year and we are quite same in terms of quantity and availability as last year."
"But the unexpected severe heatwave in March impacted production, triggering sharp spikes in spot prices of wheat. Since inflation at 7.79% ( April) and food inflation at 8.38% are emerging as major worries, priority should be to control the domestic price of wheat rather than target export earnings," Vijaykumar added.
Earlier this month, the agriculture ministry had lowered wheat production estimates by 5.7% to 105 million tonnes from the projected 111.32 MT for the crop year ending June.
Although, Vijayakumar feels that the wheat export ban can be problematic for long-term exports which need stability in policy.
However, the Geojit Financial Services strategist said, "the present priority should be to control domestic prices by ensuring adequate availability"
The export of wheat ban is allowed under two conditions. Firstly, as a transitional arrangement, the export will be allowed in case of shipments where an Irrevocable Letter of Credit (ICLC) has been issued on or before the date of this Notification, subject to submission of documentary evidence as prescribed.
Secondly, the export will also be allowed based on permission granted by the Government of India to other countries to meet their food security needs and based on the request of their governments.
The Commerce Ministry announced to send trade delegations to nine countries to explore possibilities of boosting wheat shipments. These are - Morocco, Tunisia, Indonesia, the Philippines, Thailand, Vietnam, Turkey, Algeria, and Lebanon.
In some regions of India, wheat prices have skyrocketed by almost 40%.
