Govt assures contingency measure: Wheat export ban to cool domestic prices

The government has banned the export of all varieties of wheat in view of rising domestic grain prices, a sharp decline in rabies production and the possibility that its stocks will be insufficient to secure subsidized supplies under the National Food Security Act.

Official sources said that about 4 million tonnes of the grain that has already been contracted for deliveries with letters of credit (LoC) will be allowed to be exported, while no new orders will be received. Traders, however, are critical of the government’s decision, as they believe it could disrupt volumes of transactions that have already been completed or are being negotiated and adversely affect India’s reputation as a credible supplier of grain to world markets.

They added that domestic wheat prices could fall by 15% when the market reopens on Monday. The export ban came into force on Friday and the markets are closed on Saturday and Sunday. Trade Secretary BVR Subrahmanyam said on Saturday that “all valid export orders with a letter of credit will be fulfilled.” He added that the ban on fresh exports is only an unforeseen measure and does not reflect any inward-looking policy or possibility of a ban forever.

India exported a record 7 million tonnes (MT) of wheat worth $ 2 billion during FY22, compared to just 2.1 MT worth $ 0.55 billion during FY21.
The export ban has come at a time when traders have already received orders for 5 MT and looked at more deals in the short term, in line with an export target of 10 MT set by the government. The global wheat market is currently very volatile and prices remain high due to the shortage caused by the war between Russia and Ukraine.

Of course, the ban will not apply to two types of shipments – exports made by the Indian government under bilateral agreement with a few countries to meet their food supply needs, and transports under transitional arrangements, where irrevocable letters of credit have been issued before the ban.

The government’s wheat procurement fell to a 15-year low of 18 MT during the just-ended rabies season, compared with a record 43.3 MT 2021-22. Retail inflation for wheat was 9.59% in April.

“The export ban is a wise step to balance the interests of all stakeholders,” said a spokesman for ITC, a major wheat exporter. However, Kunal Shah, a partner at Kunal Corporation, a grain exporter in Mumbai, said that India’s reputation in the international wheat market would suffer due to the export ban.

Many independent experts also believe that the government, rather than a sudden export ban that could affect farmers, should have resorted to calibrating exports via a minimum export price or an export duty. However, several other wheat-exporting countries such as Argentina, Kazakhstan and Turkey have also introduced restrictions on wheat or flour exports.

The government’s announcement of wheat exports defended the move, citing “a sudden rise in global wheat prices due to many factors, as a result of which food supplies in India, neighboring countries and other vulnerable countries are at risk”.

At the same time, the first shipment of wheat to Egypt this season was shipped on Saturday from Kandla port. Interestingly, India explored the possibilities for wheat exports to a number of countries. While Nicaragua and Syria are in talks with Egypt and Turkey about the volume of supplies and quality standards, Nicaragua and Syria have shown interest in buying grain through a government-to-government arrangement (G2G).

Last week, Prime Minister Narendra Modi asked the officials concerned to ensure quality standards for the export of cereals and other agricultural products from the country. “In view of the growing demand for agricultural products in India, the Prime Minister ordered that all measures be taken to ensure quality standards and standards so that India develops into a safe source of food cereals and other agricultural products,” it said in an official statement. .

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