Bonanza for Indian wheat exporters, but cuts in wheat quota under the PM Garib Kalyan Anna Yojana

The Indian wheat market is volatile due to the low production and procurement by the government, and the high global demand for Indian wheat owing to the ongoing Ukraine-Russia war. While the Indian government has revised wheat allocation under the PM Garib Kalyan Anna Yojana, wheat exporters are set to reap huge profits. Right to Food experts are warning of a possible wheat shortage in the country. Gaon Connection investigates.

Sarah KhanSarah Khan   6 May 2022 2:47 PM GMT

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Bonanza for Indian wheat exporters, but cuts in wheat quota under the PM Garib Kalyan Anna Yojana

Photo: By arrangement

The Government of India has revised the wheat production estimate of the country and brought it down from 111 million metric tonnes (mmt) to 105 mmt in the financial year 2022-23. This was announced at a recent press conference of the Secretary of the Department of Food and Public Distribution, Sudhanshu Pandey, which was held on May 4 in New Delhi.

This revision of wheat production estimate comes at a time when the central government has also announced India's ambitious wheat export plans. As per Pandey, India has contracted 4 mmt of wheat for export for FY 2022-23 and about 1.1 mmt has already been exported last month in April. The secretary informed that apart from Egypt, Turkey has also given approval for the import of Indian wheat.

Interestingly, last month the union minister for consumer affairs and public distribution, Piyush Goyal, had announced an annual wheat export target of 10 mmt, which seems to have been revised too.

Revisions in the country's wheat sector do not end here. There also has been a reallocation of grains under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKY).

During his May 4 press conference, the food secretary Pandey said a reallocation order has 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 more receive free wheat under the central scheme.

Prime Minister Narendra Modi had launched the Pradhan Mantri Garib Kalyan Anna Yojana in March 2020 in the aftermath of the COVID-19 pandemic as a massive public distribution of food grains for the poor. It is aimed at providing five kilogram (kg) of free wheat or rice per person per month, along with one kg free whole chana per family per month. The scheme has been extended from time to time and is valid till September this year.

The revision of wheat production estimate in the country, coupled with the wheat export target of 4 mmt and the part replacement of wheat with rice under the Pradhan Mantri Garib Kalyan Anna Yojana, has raised the alarm bells – is India headed towards a possible wheat shortage in the coming months? However, wheat exporters are in for a bonanza.

Picture this. At Mumbai (Maharashtra) and Kandla (Gujarat) ports, the wheat, which was being domestically procured from the Indian farmers at Rs 2,500 per quintal, is being exported at 330-335 US$ (Rs 25,424 - Rs 25,810) FOB (freight on board), which is close to 27 per cent higher than the previous year's price of 260-270 US$ (Rs 20,031 - Rs 20,802) FOB last year. This information was shared with the Gaon Connection by Ajay Goyal, managing director of Pune-based Shivaji Roller Flour Mill.

The ongoing Ukraine-Russia war and the reduced wheat production in India due to an early arrival of the heatwaves seems to have benefitted the wheat exporters who are in for huge profits. But back home, Right To Food experts are worried about food security of the poor who are dependent on the government's foodgrains scheme.

Sameet Panda, the Right to Food activist based in Odisha, noted that in a state like Uttar Pradesh (UP), India's most populous state with 199.8 million population, zero allocation of wheat under the Pradhan Mantri Garib Kalyan Anna Yojana would create a problem.

"In a state like UP, wheat is a part of the staple diet. It is a primarily roti consuming state, whereas if such a decision is announced for Odisha, it wouldn't be a huge problem because wheat is not consumed a lot here under PMGKY," Panda told Gaon Connection.

He also stated that the central government's recent decision of reallocation of wheat-rice under the Garib Kalyan Anna Yojana reflects the wheat shortage the country might face in the coming months.

"If PMGKY is stopped in September and isn't extended beyond it, it reflects that there is a serious decline in procurement of wheat under the government mandi system and the reallocation in PMGKY is a reflection of that," said Panda. "In the last few months, the food experts have been warning the government that we are moving towards a wheat crisis," he added.

Low domestic wheat procurement and volatile wheat market

Two months back, on March 8, Gaon Connection published a ground report on how government mandis were vacant and wheat farmers preferred selling their wheat in the open market due to a better price. As against the minimum support price (MSP) of Rs 2,015 per quintal, this year the farmers managed to get between Rs 2,500 and Rs 3,000 per quintal for their wheat produce in the open market.

In its recent press release, the Ministry of Consumer Affairs, Food and Public Distribution stated that the wheat procurement was low due to multiple reasons including low produce in Punjab, Haryana and Uttar Pradesh due to early summer and shrivel grain.

"In states like Madhya Pradesh, UP, Rajasthan and Gujarat, farmers sold their produce directly to traders and exporters at prices better than MSP i.e. Rs 21-24 per kilogram (kg) as compared to the MSP of Rs 20.15 per kg," read the press statement. It also noted that farmers, traders were holding some quantity, expecting higher price of wheat after some months.

Low procurement by sarkari mandis was acknowledged by the secretary Pandey in his May 4 press conference and he clarified: "This year due to an increase in market prices and higher demand by the private players both for the domestic as well as export purposes, the purchase by the government agency is less. But that goes in favour of the farmers. Farmers are getting a good price for the wheat."

He went on to add that earlier the farmers had no option but to sell to the government. "Now, they are selling only that quantity to the government which they are unable to sell in the private market. Therefore, from that perspective, the government procurement has reduced."

Shweta Saini, the New Delhi-based independent researcher on Indian agricultural policies, said that the entire wheat procurement situation in the country is very volatile and it's difficult to predict the direction of the market before July this year.

"Globally, our wheat is being sold at a cheaper price so we do have a scope [of higher exports] however we need to see how much wheat is available with us and until we don't have a correct assessment of wheat, we can't predict," Saini told Gaon Connection.

As per the Indian government's data, wheat export in 2019-20 was 0.217 mmt, which jumped to 2.155 mt in 2020-21 and 7.215 mmt in 2021-22.

'Unprecedented global demand for India wheat'

According to Ajay Goyal of the Shivaji Roller Flour Mill, so far, India's wheat exports were mostly limited to the neighbouring countries like Bangladesh and Nepal, and the middle-east countries. But things have changed drastically after the Ukraine-Russia war.

"Ukraine used to feed a lot of countries like Turkey, Tunisia, Egypt etc. Due to the Ukraine-Russia war, these countries are now turning to India to procure wheat as they do not have any other alternative," Goyal said.

Talking about the unprecedented demand for Indian wheat created due to the war, he further added: "The war broke out somewhere near February and March. There were some shipments that had taken place and wheat was reaching other countries. But now suddenly, there's no replacement of wheat stocks and countries like Egypt are looking for suppliers and most of them are coming towards India."

Goyal also said that Indian wheat was being preferred globally due to the cost factor. Whereas India was exporting wheat for 330-335 US$, the European wheat continued to be offered at 420-430 US$ FOB, thus making the Indian exporters reap huge profits in the present situation.

Shedding light on the wheat export issue, Saini said: "A large amount of wheat crops will hit the global markets as harvest from the European Union, Canada, United States' will arrive by June, but they're sold at a higher price. So by July, we will know how much demand there is for the Indian wheat."

Nothing to worry, claims the Indian govt

While India's wheat exports are expected to increase, the central government has maintained that the country is in a comfortable situation with an overall surplus availability of grains and the stocks are expected to be higher than the minimum requirement for the next one year.

"After meeting the requirement of welfare schemes in the year ahead, on April 1, 2023, India would have stocks of 8 mmt of wheat," the food secretary said in the May 4 press conference. As per the Food Corporation of India (FCI), the minimum wheat stock on April 1 should be 7.5 mmt.

However, Saini raises a question: "We need to understand that if the estimate [wheat production] is 105 mmt, that means the government has a lot of grains so why did it reduce the wheat allocation under the PMGKY?"

She also added that the cereal inflation doesn't seem to be going down anytime in the near future, and "somewhere we need to acknowledge that there is less grain in the system "

Regarding the reallocation of grains under the Pradhan Mantri Garib Kalyan Anna Yojana, secretary Pandey said that the decision was taken after consulting with the respective food and public distribution authorities in the states.

Justifying the May 2 order of part replacement of wheat with rice, Pandey added that there was a demand for the same from the states. "Since they were rice-consuming states, they would be more than happy to get more rice allocation," he was quoted in the press release.

"If rice stocks keep lying with states, the reimbursement cycle of food subsidy gets delayed. The moment the state is able to distribute the rice into the PDS system, they become entitled to claim their subsidy. This is an added advantage to the states; otherwise they have to maintain the stocks and bear the expenses and only after distribution they will be able to get reimbursement of their food subsidy," the secretary added.

Meanwhile, Sameet Panda of the Right to Food Campaign Odisha warns: "If the decline in wheat procurement persists, it could impact the NFSA (National Food Security Act, 2013) which is a central act in contrast to the PMGKAY which is a temporary scheme." The 2013 Act legally entitles upto 75 per cent of the rural population and 50 per cent of the urban population to receive subsidised foodgrains under the Government of India's Targeted Public Distribution scheme.

ukraine russia war wheat procurement PMGKAY #public distribution system #story 

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