WTO may ease curbs on Indian grain exports

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• The WTO is looking into resolving its rules that are making it difficult for India to export food grains to meet shortages in other countries, caused by the Russia-Ukraine war.

What are the Issues/Challenges?

• The WTO rules make it difficult for a country to export grains from official stocks if these have been procured from producers at a fixed price (minimum support price, in India’s case), instead of market rates.
  • Exports by private traders who buy grains from farmers at market rates are not impacted by the WTO norm.
• Russia’s military offensive in Ukraine severely hampers wheat exports from both countries, which collectively account for more than a quarter of global supplies of the commodity.
• Issues of Quality: Fears remain that the quality of shipments and logistics could hold back the Indian economy from achieving its full market potential.
  • Impurities in some of India’s produce means that some buyers are wary of sourcing wheat from the country. The quality determines whether the grain can be used for making food products.
• Low profits: The sector has struggled with profitability in recent years, making it even more critical for India to capitalise on this opportunity.
• The supply crunch has pushed global wheat prices to record highs in recent times.
  • With little or no prospects of de-escalation in the short- to medium-term, supply scenario is not going to improve anytime soon, putting wheat-importing nations in a tight spot.
• Inflation in domestic market: As exports reduce India’s stocks; this could push up the price of the grain by 8 to 10 per cent on the year.
  • This would make wheat more expensive for households already struggling with rising food prices, which have propelled India’s retail inflation to close to 7 percent.
• There has also been a fall in the crop yield and shrunken grain size in the states of Punjab, Haryana, and Uttar Pradesh “due to excessive heat and improper use of fertilisers and pesticides.
• Insufficient port infrastructure to cater to surging demand, as well as higher freight costs could prove to be obstacles.

India’s Wheat Production & Export

• Agricultural GDP: About half of India’s population depend on agriculture for their livelihood and the sector accounts for about 20 percent of the country’s GDP.
• Russia was the world’s largest wheat exporter: Before the war in Ukraine, Russia was the world’s largest wheat exporter and Ukraine the fifth, according to the World Bank data.
  • Russia accounted for 17.6 percent of the global share of wheat export revenue.
• India’s share: India accounted for just 0.5 per cent of wheat exports in 2020, despite it being the world’s second-biggest grower of the commodity.
  • It produces more than 100 million tonnes of wheat per year, placing it second only to China.
• Consumption data: The country’s wheat supply for the year will reach 147 million tonnes, while domestic consumption is forecast at 105 million tonnes.
• India offered to supply grains to other countries that are facing a food shortage should WTO norms allow it.

Significance for India

• 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.
• New destinations for India: New promising export avenues are opening up and several countries including Turkey and Lebanon are potential new major growth markets for India.
  • Egypt, which is the biggest importer of wheat from Russia and Ukraine, has already approved India as a supplier.

Way Forward

• Enormous opportunity to India: The current supply gap presents an enormous opportunity to India to explore its agricultural potential and boost wheat exports.
• Long-term exporter: We must focus on becoming a long-term exporter to these countries and to ensure this we need to export only good quality wheat to them.
• The government has outlined plans to send trade delegations to countries including Morocco, Tunisia, the Philippines, Vietnam, Turkey and Lebanon.

Source: TH