Banning of Wheat Export by India

In News

• Recently, the Ministry of Commerce and Industry allows exporting wheat consignments registered with customs authority prior to ban order. 

About Present status of India’s wheat exports

• India is the world’s second-biggest wheat producer.
• India banned exports of wheat on May 13: the Directorate General of Foreign Trade (DGFT) issued a notification banning exports of wheat with immediate effect to control price rise.
  • The restrictions would not apply in cases where prior commitments have been made by private traders through Letter of Credit as well as in situations where permission is granted by the government to other countries to meet their food security needs.
• Recent order: It has been decided that wherever wheat consignments have been handed over to Customs for examination and have been registered into their systems on or prior to 13 May, such consignments would be allowed to be exported.
• Deendayal Port in Kutch district: wheat is primarily transported to African countries, Bangladesh, South Korea and Yemen from here.
• Export countries: These ships will carry wheat to Brazil, Bangladesh, Oman and Indonesia.
  • The government also allowed a wheat shipment headed for Egypt.
  • Egypt has agreed to buy 5 lakh tonnes of wheat from India.
• Export statistics: In the current financial year 2022-2023, the government estimates about 45 lakh metric tonnes of wheat to have been contracted for exports.
• Overall production: Wheat production in India is expected to be lower than the earlier estimates.

Why is demand for India’s wheat expected to rise?

• The disruption to global wheat supplies in turn has thrown open opportunities that India’s grain exporters are eyeing, especially given the domestic surplus availability of the cereal. 
• More countries are turning to India because of the competitive price, acceptable quality, availability of surplus wheat and geopolitical reasons. 
• While the existing importers are buying more, new markets have emerged for Indian wheat. Exports this fiscal year are expected to be almost 10 million tonnes worth $3 billion.

Issues/ Reasons for this sudden decision by the Government

• Wheat prices have been rising internationally on account of supply shortages due to the Russia-Ukraine war. The demand for Indian wheat has increased overseas.
• Shipments stuck: Over 4,000 wheat-laden trucks were stuck in a queue outside Kandla port and four ships, half loaded with wheat and no order to sail, were also stranded at the port.
• Due to a lower production and a higher demand from the private buyers, the government’s procurement of wheat for the PDS is also expected to be much lower this year.
• The government had earlier restricted wheat exports to manage the overall food security situation in India.
  • Also, to support the needs of neighbouring and vulnerable countries that have been adversely affected by the sudden changes in the global market for wheat and became unable to access adequate wheat supplies.

Significance for India

• Higher exports would help India to bring down record inventories and provide Asian buyers with cheaper supplies amid a rally in global prices due to limited supplies from major exporters such as Russia and Canada.
• Opportunities for India: The opportunities included the export of food grain such as wheat and the possibility of manufactured goods being exported to destinations for which supplies had become unreliable.
• Surplus in production: India has reached out to more than 20 countries regarding exporting wheat, and is targeting a record 15 million tonnes of wheat for export this year.
  • India is expected to have a surplus this year, producing more than 111 million tonnes of the crop.
• There are already signs of increased purchases of wheat by private traders: given the lucrative export markets.
• Cost of Indian wheat is comparatively lower: While there has been a surge in global prices, India’s wheat rates are relatively competitive.
• Export to other countries: In recent years, India has mainly exported wheat to countries including Bangladesh, which receives about half of India’s shipments of the grain, the UAE and Sri Lanka.

What is the future outlook?

• The government is optimistic about the long-term export opportunities not only for wheat, but for all cereals including millets and superfoods.
• Trade sources say if Indian wheat prices remain competitive and geopolitical and weather conditions stay favourable, the scope is good for wheat exports. 
• India has won the confidence of markets such as Sri Lanka and Bangladesh. 
• It needs to establish itself in the new markets too and the government should facilitate it.

Source: IE