Government bans export of wheat in view of spike in global prices, less than estimated domestic production

Government bans export of wheat in view of spike in global prices, less than estimated domestic production

New Delhi, May 14, 2022

The Government has banned the export of wheat, except under certain conditions, in view of the sudden spike in the global prices of the commodity and less than estimated domestic production, which it feels could put the food security of India, neighbouring and other vulnerable countries at risk.

In a notification issued yesterday, amending the Export Policy of Wheat, the Directorate General of Foreign Trade (DGFT), Department of Commerce, noted that the rise in the prices of wheat had arisen out of many factors.

It said the decision to restrict exports was taken to "manage the overall food security of the country and to support the needs of the neighbouring and other vulnerable countries".

The notification made it clear that export of wheat would be allowed under certain conditions.

This could be as a transititional arrangement in which export would be allowed in case ships where Irrevocable Letter of Credit (ICLC) had been issued on or before the date of the notification, subject to submission of documentary evidence as prescribed.

It would also 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.

Senior government officials told the media today that the decision to restrict wheat export had been taken to curb inflationary expectations due to speculation and that India remained a reliable supplier.

Commerce Secretary B. V. R. Subrahmanyam said that all the exports orders where the letter of credit has been issued would be fulfilled.

He added that directing the wheat exports through government channels would not only ensure fulfilling the genuine needs of India's neighbours and the food deficit countries but also anchor inflationary expectations.

Sudhashu Pandy, Secretary, Department of Food and Consumer Affairs, and Manoj Ahuja, Secretary, Agriculture were also present at the press conference.

“Apart from the food security of India, the Government is committed to ensuring food security of neighbours and vulnerable countries. Of the export of 7MT last year, almost half of it went to one neighbouring country alone, which is Bangladesh,” the Commerce Secretary said.

“India’s credibility is as a trading nation. We could have actually imposed the ban (wheat) overnight. The figure which is shown as 4.2-4.3 MT is what has been contracted as surprise from India, this is our estimate of which about 1.2 MT has gone in April. In May we are expecting to ship 1.1 MT, may be half of it is gone already.”

He said that the control order serves three main purposes. “It maintains the food security for the country, it helps others who are in distress and maintains India’s reliability as a supplier.”

He said that in the name of prohibition (control order), the Government is directing the wheat trading to a certain direction. “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 the government to government window has been kept opened,” he said.

Pandey said that the government has boosted the availability of wheat by reallocation to States. Talking about the availability of wheat, he said, “This year our opening stock of wheat was 190 LMT which was little less than last year’s opening balance of 273 LMT. The last year year’s procurement was 433 LMT whereas in Rabi procurement, this year’s estimated procurement is about 440 LMT. The extra procurement so far is around 180 LMT.”

“Adding up the stocks, against the stock of 706 LMT of last year, this year the stocks would be 375 LMT and that’s why after consulting with the states, we have only reallocated some quantities by changing ratios of wheat and rice. For example, States getting wheat and rice in the ratio 60:40 has been made 40:60. Similarly, the ratio of 75:25 is made 60:40. States where rice allocation was not there, we have continued to provide wheat. Where rice allocation was zero, they will continue to get wheat. For all small states-NE states and special category states, allocation has not been changed,” he said.

“With this, we have boosted the availability of wheat to about 110-111 LMT more. Adding it to 185 LMT, it become 296 LMT which is almost as last year’s.”

Ahuja said that heat waves, particularly, posed damage to wheat crops especially in north-western India this year, but the difference in availability compared to last year is marginal.

“Last year the production figures of wheat were 109 LMT for the country. This year in February, we have come out with advanced estimates for this year’s production and we have estimated 111 LMT. Our estimates shows 105-106 LMT of wheat availability this year and we are quite same in terms of quantity and availability as last year,” he added.


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