Modi may relax wheat ban by June end

Rama Krishna Sangem

Prime Minister Narendra Modi is expected to relax ban on wheat exports by June end, when he goes to Germany to attend G-7 countries meeting. Indications to this effect are available after seeing the reactions of different countries to India’s sudden ban on wheat exports, when they are going great guns. India’s wheat exports are likely to go up from 25 lakh tons in 2019 to 1.10 crore tons by 2023. Restrictions on exports were imposed on May 14. 

G-7 meeting will be held at Schloss Elmau, Bavarian Alps, Germany from June 26 – 28. US president Joe Biden and leaders of the UK, France, Italy, Germany, Japan and Canada will be present. Even before the G-7 leaders raise this issue of wheat exports ban, India will take some steps to benefit both wheat importer countries as well as wheat producing farmers in the country. 

PM Modi is going to attend the meeting as a special invitee. He will have to take into account the objections raised by the agriculture ministers of G-7 countries who met in Stuttgart in Germany immediately after the ban imposed on May 14, Saturday. German agriculture minister Cem Ozdemir who spoke for the group of ministers said:”If everyone starts to impose export restrictions, that would worsen the crisis”.

Already, the western countries, especially the US is unhappy with India’s neutral stand in the ongoing Russian war against Ukraine. The sudden stopping of wheat exports from India is expected to lead to price rise of food items in the western countries. Ukraine and Russia are among the top exporters of wheat. The ongoing war in Ukraine since February 24 has affected the wheat supply chain.

The ban on wheat exports has domestic repercussions too. Farmers in Punjab, UP and other northern states were happy with rising wheat prices for the last three months. They were getting offer prices around Rs 2,500 (350 US dollars) per quintal, as against the minimum support price (MSP) of Rs 2,015 (250 US dollars).  This almost on par with the average price of wheat in the US, around 230 -260 dollars per quintal.

India normally exports around 25 lakh tons of wheat every year to half a dozen countries, going by the statistics of past few years. But, this year’s opportunity provided by the war on Ukraine increased our exports orders – totaling around 80 lakh tons, and counting. By March, 2022 end, the union commerce ministry has estimated our wheat exports would touch 79 l akh tons, to not less than 20 countries.

As the war drags on, many more countries have begun placing orders with Indian wheat traders, as our quality of wehat is better compared other exporters. But, the domestic conditions – slight decline in wheat production – from estimated 11 crore tons to 10 crore tons, extension of food security schemes for six more months to around 8 crore people and increase in wheat market prices by at least 12 per cent – compelled the government to stop exports.

PM Modi is worried over the possible impact of wheat price rise on the electoral prospects of BJP in the coming assembly elections in Gujarat, Himachal Pradesh etc. One more thing, wheat farmers who usually demand MSP this time are not keen on selling their produce to FCI at mandis. Some rich farmers have stocked their wheat expecting a better price in June onward.

Because, they got more price than MSP. This sudden ban on exports has dashed off their hopes. Some farmers’ unions are demanding that the Central government pay an extra bonus price of Rs 450 per qunital over and above MSP. But, FCI is not ready in view of its financial position. India is committed to send wheat supplies to some neighbors like Sri Lanka and Bangladesh and some African countries as goodwill gesture.

These commitments will be fulfilled by June July this year. Then there will be surplus wheat in our country. In view of this situation, India may relax restrictions on wheat exports by June third week. If not full relaxation, there will be partial relaxations to some select countries including those from G-7. Interestingly, when G-7 ministers criticized India for wheat exports ban, it is China which defended India, saying:”India has right to defend its food security”.

Also Read:

The Economist’s love-hate for India