India prohibits wheat exports: Is it too little, too late?
On May 13, the Commerce Ministry prohibited the export of wheat by private traders and limited it to government-to-government channels. The order has left farmers high and dry, and there are fears of hoarding and blackmarketing. Gaon Connection spoke with farmers, traders and agri sector experts to understand the impact of the recent notification.
Sarah Khan 17 May 2022 11:17 AM GMT
For the past four days, Jagdeep Upadhyay has been a worried man. After two years of the pandemic, the wheat farmer was hoping to earn profits this year. And things were looking up due to the global surge in demand for wheat owing to the ongoing Ukraine-Russia war that has affected global supply chains.
However, the May 13 notification of the Indian government, which prohibits the export of wheat by private traders and allows only government-to-government export, has dashed his hopes. The government order has come into force with an immediate effect.
"I have been selling my wheat produce to private traders because there's not a single government procurement centre nearby. Now the government has stopped export by private traders. How will I get a good price for my wheat?," the farmer from Gopalpur village in Uttar Pradesh's Chandauli district asked.
Expanding further on his woes, Upadhyay said: "After the government order, the wheat will now be bought and sold within the country. This means wheat farmers like me will get low prices for our produce against what we were getting from the traders who were exporting the wheat."
The Ministry of Commerce and Industry in its May 13 order announced that it was prohibiting the export of wheat until further orders.
"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," the order read.
The order also notes that the transitional arrangement export will be allowed in case of shipments where irrevocable letters of credit (ICLC) have been issued on or before the date of the notification. It goes on to state that wheat exports will be allowed on the basis of permission granted by the Government of India to other countries to meet their food security needs and based on the request of their governments.
Appreciating the concerns around food security, wheat farmers are still upset with the sudden government order. "Now that the exports have stopped, the traders will buy the wheat at half the prices. The government should have thought about us before announcing such a decision," a farmer from Gopalpur, who did not wish to be named, told Gaon Connection.
Additionally, in its new press release issued on May 17, the Ministry of Commerce and Industry stated that wherever wheat consignments have been handed over to Customs for examination and have been registered into their systems on or prior to 13.5.2022, such consignments would be allowed to be exported.
Some view the recent order as a U-turn by the government as just about a month ago, on April 4, the central government had announced a wheat export target of 10 million tonnes, which was revised and brought down to 4 million metric tonnes on May 4, as concerns were being raised around low wheat production in the country due to an early arrival of heatwaves this year and the rise in global demand for wheat.
For the past more than a month, Gaon Connection has been reporting on the possible wheat crisis in the country.
Despite prohibition, wheat exports may continue
To understand the impact of the May 13 notification, Gaon Connection spoke with farmers, traders and agriculture sector experts who reflected on the issue of food security in the country and the global wheat market scenario.
"Despite the ban, India may, through a window, end up exporting much more than at least what is contracted to be 4.5 million metric tons," Shweta Saini, the New Delhi-based independent researcher on Indian agricultural policies, told Gaon Connection.
Earlier this month, on May 4, Sudhanshu Pandey, secretary, Department of Food & Public Distribution, had informed that India had contracted 4 million metric tons (mmt) of wheat for export for FY 2022-23 and about 1.1 mmt had already been exported last month in April. The secretary also said that apart from Egypt, Turkey had also given approval for the import of Indian wheat.
"There's an assessment that we feel that the export will still take place except, it will take place through government to government mode, and since the government doesn't have much stock so it will either do through stock trading enterprise or by opening government tenders," Saini said.
"History has it that we (India) were not an important wheat player but last year our contribution to global exports increased from 2 per cent earlier to 4.5 per cent, and it was predicted to grow much higher as we were looking to contribute 10 million tonnes," she added.
But all that seems to have changed with the recent government notification.
Extension in wheat procurement
On May 6, Gaon Connection had reported how the Government of India had revised its wheat production estimate and brought it down from 111 mmt to 105 mmt in the financial year 2022-23. This was primarily due to the early arrival of heatwaves in the country in March this year, which has affected the wheat crop.
A drop in production has also affected welfare schemes, such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) under which the wheat allocation has been revised. During his May 4 press conference, the food and public distribution secretary Sudhanshu Pandey informed that a reallocation order had been issued under which 5.5 mmt additional rice will be allocated in place of wheat under the central scheme.
Meanwhile, four states – Uttar Pradesh, Bihar, Tamil Nadu, and Kerala – will no longer receive the free wheat under the central scheme, as per the order.
Owing to the drop in wheat production in the country this year, and farmers preferring to sell their wheat crops to private traders at a price higher than the minimum support price (MSP), a large number of government procurement agencies have failed to meet their annual target of wheat procurement.
This has made the central government extend the date for wheat procurement in the country to May 31, 2022, hoping that with a ban on wheat exports the farmers would sell their produce at the government mandis.
Usually, the wheat procurement by the government is done between April and mid-May.
The central government in its May 14 press release has now asked all the wheat producing states and union territories to continue procurement till May 31, 2022.
"The Ministry of Food & Public Distribution and Consumer Affairs has also directed FCI (Food Corporation of India) to continue with wheat procurement under the central pool. The extended period is expected to benefit farmers," the announcement read.
To ensure that no wheat farmer faces inconvenience, Modi Sarkar extends wheat procurement season till 31 May 2022. We are committed to ensuring farm prosperity. pic.twitter.com/FfUE2bwuWO— Piyush Goyal (@PiyushGoyal) May 15, 2022
Building more on the discourse, Deepak Johnson, an associate fellow at Foundation for Agrarian Studies, a Bengaluru based non-profit, added that in terms of domestic food security, the extension of the procurement window by the central government until May 31 suggests that the government has concerns about the domestic procurement not being enough, especially if the government has to meet the requirements of welfare schemes like PMGKAY.
Another important aspect highlighted by Johnson was the open market sale of wheat. "When there is a situation of inflation and the prices are going to rise, then the government intervenes in the open market sale using the government stocks. If there are not enough stocks, then the open market sale of wheat would be affected. There are concerns that inflation will continue for a few more months," he told Gaon Connection.
'Offer farmers incentives and bonuses over the MSP'
The Indian government's recent ban on wheat exports has a direct impact on the farmers, who complain they have been left high and dry.
"The farmers were finally happy that they will be able to get a better rate than the Rs 2,015 per quintal wheat MSP fixed by the government. The export ban will lead to a stagnation in the wheat prices and the traders will buy wheat at cheaper rates," said Ajeet Singh, a farmer based in Barabanki's Durgapur Naubasta village.
A similar sentiment was shared by Jagatpal Yadav, a 31-year-old farmer based in Sadar tehsil of Unnao, who stated that the ban on export has led to losses for the farmers and if the Indian wheat was not sent abroad then there were scarce chances of wheat farmers getting a good price for their produce.
"Only if the wheat goes to the open market that farmers get a good price," Nand Kumar Prajapati, a farmer from Unnao's Bichhiya Vikas Khand, told Gaon Connection.
"Not every farmer is able to sell at MSP. This time, the market price was higher than MSP, many traders were taking wheat directly from home, the farmers didn't even have to pay extra transportation cost nor palledaari and now with the government's announcement, the price of wheat is going to fall," Prajapati said.
Taking note of the farmers' complaints, Johnson of Foundation for Agrarian Studies suggested that the government should help the farmers with the MSP-market price gap by relaxing its rules and procuring at a higher price i.e. more than the MSP, which was fixed at Rs 2,015 per quintal.
"The government can take a step in this direction by offering additional incentives and bonuses over the MSP. One of the major factors for increased cost of cultivation is the diesel prices, which have continued to rise in the recent period" Johnson said.
Fears of hoarding and blackmarketing
Another important issue which the Secretary Department of Food and Consumer Affairs, Sudhanshu Pandey, Secretary Agriculture, Manoj Ahuja and the Commerce Secretary, B.V.R Subrahmanian highlighted while addressing a press conference on May 14 was the unregulated hoarding of wheat.
Talking about the government's order on exports, the Commerce secretary Subrahmanian said, "We do not want wheat to go in an unregulated manner in places where it might just get either hoarded or it may not serve the purpose of serving the food requirements of vulnerable nations. That's why government to government window has been kept open."
Clearing the air about the issue of black marketing or hoarding, Saini told Gaon Connection, that the trader's anticipation of higher wheat prices in the future are yet to vanish.
"Our crop is less and global demand is a lot and there's an overall food security issue so our prices are not going down anytime soon," she said. If farmers do resort to hoarding, which was being predicted before the export ban, and if they dump it in the market, we will see some moderation, she added.
"By May 14, most moderation happened in the case of Madhya Pradesh where Rs 94 per quintal wheat price was reduced within a day after the [May 13] notification," the independent researcher stated.
However, fears of hoarding continue. According to Saini, if traders anticipate wheat prices to remain high, then there could be chances that people who have the capacity will hold back.
"We need to remember that wheat is a staple crop of the country so if inflation continues, then the government might come out with more restrictions," the researcher added.
With inputs from Ramji Mishra (Sitapur, UP), Sumit Yadav (Unnao, UP), Ankit Singh (Varanasi, UP) and Virendra Singh (Barabanki, UP).