Government assures emergency measures: Wheat export ban to reduce domestic prices

The government has banned the export of all varieties of wheat due to rising domestic prices of foodgrains, sharp decline in Rabi season production and insufficient stocks to ensure subsidized supply under the National Food Security Act.

Official sources said that about 4 million tonnes of cereals which have already been contracted for shipment with credit letter (LOC) will be allowed to be exported, while new orders will not be accepted. Traders, however, are critical of the government’s decision, as they feel it could disrupt many of the transactions that have already been finalized or are being negotiated and adversely affect India’s reputation as a reliable supplier of grain to the world market.

They added that with the market reopening on Monday, domestic wheat prices could fall by 15%. The export ban is effective from Friday and the market is closed on Saturdays and Sundays. Commerce Secretary BVR Subramanian said on Saturday that “all valid export orders, including letters of credit, will be honored.” He added that the ban on fresh exports is only a contingency measure and does not reflect the possibility of any intrusive policy or permanent ban.

India exported a record 7 million tonnes (MT) of wheat worth $ 2 billion in FY22, compared to just 2.1 MT in FY21 worth $ 0.55 billion.
The export ban comes at a time when traders have already received orders for 5 metric tonnes and are looking for more contracts in the short term, maintaining the export target of 10 metric tonnes set by the government. The global wheat market is currently very volatile and prices continue to rise due to deficits caused by the Russia-Ukraine war.

Of course, the ban would not apply to two types of shipments – the Indian government pledges exports under bilateral agreements with a number of countries to meet their food security needs, and consignments under the transitional arrangement, where the indefinite letter of credit is issued. Before the ban.

The government’s wheat procurement in the just-concluded Rabi season was a 15-year low of 18 metric tons, up from a record 43.3 metric tons in 2021-22. Wheat retail inflation was 9.59% in April.

“The export ban is a fair move to balance the interests of all stakeholders,” said a spokesman for ITC, the main wheat exporter. However, Kunal Shah, a partner at Kunal Corporation, a Mumbai-based grain exporter, said the ban would tarnish India’s image in the international wheat market.

Many independent experts also believe that instead of sudden export bans that could hurt farmers, the government should have calibrated exports through minimum export prices or export tariffs. However, other wheat exporting countries such as Argentina, Kazakhstan and Turkey have also imposed restrictions on wheat or flour exports.

The government’s announcement banning wheat exports defended the move, saying “the sudden rise in global wheat prices for a number of reasons, which puts India, its neighbors and other vulnerable countries at risk of food insecurity”.

Meanwhile, the first shipment of wheat to Egypt this season has been sent from Kandla port on Saturday. Interestingly, India is exploring the possibility of exporting wheat to different countries in this financial year. While it is discussing the quantity and quality of shipments with Egypt and Turkey, Nicaragua and Syria have expressed interest in procuring grain through the government-to-government (G2G) system.

Prime Minister Narendra Modi last week asked the concerned officials to ensure quality for the export of food grains and other agricultural products from the country. “In view of the growing demand for Indian agricultural products, the Prime Minister has directed that all measures be taken to ensure quality and standard so that India develops into a guaranteed source of food grains and other agricultural products,” an official statement said. .