Commodities

Behind-the scenes maneuvers on wheat export ban

Subramani Ra Mancombu | Updated on: May 16, 2022
One of the main reasons for the government to ban wheat exports was the looming grim global food situation due to the continuing Russia-Ukraine war

One of the main reasons for the government to ban wheat exports was the looming grim global food situation due to the continuing Russia-Ukraine war | Photo Credit: AMIT DAVE

Order signed only after US markets, banks and media called it a day late on May 13

When the news broke out early on May 14 that the Centre had banned wheat exports with immediate effect, it caught everyone by surprise — from media to exporters to even government officials.

But behind that “surprise” decision — which some called a surgical strike against exporters — taken late on May 13 (Friday) evening, there was meticulous planning and quite a bit of strategic thinking.

Under the radar

For instance, it was deliberately implemented on Friday evening with a couple of precautions taken so that government officials in charge of making the order public could return home only early on Saturday morning.

Sources said that first, the order was signed only around midnight by which time the calculation was media would have gone to bed. The second precaution taken was to ensure that the order was made public only after the US markets and banks closed. “Had the order been released when the US markets and banks were open, exporters could have easily opened letters of credit for at least one million tonnes or even more,” said one of the two sources.

The order allows shipments of wheat where the irrevocable letter of credit (ILOC) has been issued on or before May 13. One of the main reasons for the government to ban wheat exports was the looming grim global food situation due to the continuing Russia-Ukraine war.

Caught by surprise

Trade sources concede that they were caught by surprise but agree that the Centre had taken the decision to ensure “food security for the country, its neighbours and vulnerable countries”. “Though there were discussions among exporters if the Centre could impose a ban on exporters, the latter were a little overconfident, arguing that since a couple of corporates were actively involved in wheat exports it would not happen,” said a second source.

According to a wheat miller, the Prime Minister’s Office was tracking the whole issue closely, particularly after wheat procurement by the Food Corporation of India (FCI) dropped by over 50 per cent and reports pointed to a lower-than-expected production this year.

India’s decision was also based on the outlook for global food commodities with crude prices ruling above $100 a barrel resulting in prices of key NPK fertilisers trebling since the Ukraine war broke out.

Published on May 16, 2022
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