Wheat export ban is shortchanging farmers

AS Mittal | Updated on: May 20, 2022
The Centre may have too soon rethink its wheat export policy

The Centre may have too soon rethink its wheat export policy | Photo Credit: SANDEEP SAXENA

The country has adequate wheat stocks for its food schemes. A calibrated exports policy would benefit farmers

The Russian invasion of Ukraine has put pressure on global wheat supplies. As the second major wheat grower after China, the world was looking to India to meet its need for the staple foodgrain.

Notwithstanding overflowing granaries, India has banned wheat exports citing inflation and fears arising out of the ‘fragility’ of our food security. But wheat is not the sole and significant contributor to the rising inflation and the threat to the country’s food security.

We did have an opportunity to increase wheat growers’ income by tapping the export market and sharing the gains with farmers. Instead of immediately banning the export of wheat, the policymakers could have opted for a gradual reduction in the quantum of export to combat the speculation over food inflation.

However, the government has allowed two kinds of shipments in its revised policy — government-to-government exports to other countries to meet their food security needs and to honour their need-based requests.

At least a dozen countries have sent a diplomatic request for wheat supplies. The government may reconsider and pave the path to reinstate export to extend the benefits to farmers.

After the ban, prices of wheat in the domestic market have slumped to around ₹1,950 per quintal compared to the minimum support price (MSP) of ₹2,015 in Madhya Pradesh, Uttar Pradesh and Bihar where the Food Corporation of India (FCI) was not procuring.

After a long time, farmers were able to get ₹250-350 per quintal over the MSP. Farmers were likely to gain more as global wheat prices hit a record spike fetching around $453 per tonne which is around ₹35,000 per tonne or ₹3,500 per quintal.

Before the ban, about 45 lakh tonnes of wheat had already been contracted for export in FY 2022-23, out of which about a third had already been exported in April but the remunerative benefits were not passed on to farmers.

At least ₹500 per quintal from the foreign exchange earned on wheat export should have been passed on to farmers as the extreme heatwave affected the wheat yield by 25 per cent.

Earlier India had hoped to export 100-120 lakh tonnes of wheat and capture the global market, the fallout of the Russian invasion of Ukraine. The government had estimated the production of 1,110 lakh tonnes of wheat.

Though the final figure for wheat production is awaited, it is estimated at 1,050 lakh tonnes. The deficit in the output of about 60 lakh tonnes may be one of the reasons behind the ban.

Adequate wheat stock 

One more justification given for the wheat export ban is to secure our food security. But what is the real situation on the wheat stock front?

On May 4, the Department of Food and Public Distribution (DFPD) claimed that the food situation was comfortable with the overall surplus availability of grains and stocks expected to be higher than the minimum requirement for the next year.

After meeting the requirement of the Public Distribution System (PDS) and welfare schemes in the year ahead, on April 1, 2023, India would have stocks of 80 lakh tonnes of wheat, well above the minimum requirement of 75 lakh tonnes as buffer stock.

India is the world’s second-largest producer of wheat, having produced 1,096 lakh tonnes in 2020-21, contributing around 15 per cent of the world’s total production. A chunk of the grain goes towards maintaining food stocks for strategic domestic consumption.

According to the DFPD, the warehouses have around 190 lakh tonnes of wheat stocks against a buffer norm of 75 lakh tonnes and around 195 lakh tonnes to be procured in FY 2022-23 marketing season.

Out of the total 385 lakh tonnes, 305 lakh tonnes are meant for the allocation or distribution under the National Food Security Act (NFSA), the OWS and the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKY).

Missed opportunity

The world was banking on India for the supply of wheat as no fresh arrival is expected from anywhere in the world between now and July. The wheat crop of Ukraine and Russia will mature in August and September though no one knows the extent of damage to the wheat fields, godowns and ports of Ukraine.

Australian wheat, which competes with Indian wheat, will arrive only in November, thus India may rethink its export policy.

The prolonging Ukraine-Russia conflict was an opportunity for India to tap the global wheat market and sustain demand for its wheat even after the Russia-Ukraine war ends. But now we may have to forge a long-term relationship with each of the key markets.

The share of Russia and Ukraine in the global wheat export basket was 30 per cent, that is, 420 lakh tonnes and 240 lakh tonnes, respectively, for 2021-22, whereas India with a share of less than 5 per cent, had exported 78.50 lakh tonnes in 2021-22.

Its share was barely 2 per cent in preceding years. India was not a big player in the export market in earlier years, as international prices were low in comparison to domestic prices at that time.

Now to fill up the gap in the global market, India could draw up a strategy after some time to step up the country’s wheat export target to a record 100 lakh tonnes in the fiscal year 2022-23.

The way forward 

It is unlikely that India will make a bid to capture every market vacated by Russia and Ukraine this year. If we go by the 2020-21 numbers, the lion’s share of Russian and Ukrainian wheat exports went to nations such as Egypt, Indonesia, Turkey, Nigeria, Italy and Bangladesh.

This is the first time India is exporting wheat to Egypt and Turkey. Unfettered wheat exports could pose a threat to the nation’s food security. However, a regulated wheat export policy would have ensured farmers of their share of profits.

This was also a good opportunity to dispel the global negative perception of India’s export policy, while helping farmers too in the bargain.

The writer, Vice-Chairman Sonalika Group, is Chairman, Assocham Northern Region Development Council

Published on May 20, 2022
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