The world is staring at one of its worst food crises in recent years. Russia’s invasion of Ukraine has cut supplies to two major grain producers. Adverse weather conditions have affected the crop in many countries. The resulting shortfall is worsened by precautionary export cuts by several countries, including India, which on May 13 banned new contracts for wheat exports by the private sector, prompting the Center to oust Pradhan in government-to-government deals. was left open.
India is not the only country that has announced an export ban. At least 15 countries are said to have banned food and fertilizer exports to ensure the availability of their populations. The inevitable result of all this is shortages and, therefore, record global food inflation.
The World Bank has estimated that wheat prices will rise by more than 40% this year.
The Government of India has said that it has restricted the export of wheat to calm the overall food security situation and inflation in the country. But India is one of those countries which is not lacking.
Government data shows that the country has enough stock for domestic needs and exports. Wheat production was expected to hit a record 110 million tonnes this year, but hot and dry weather since March has shrunk the wheat crop kernels in many regions. As a result, the production of wheat is now estimated to be 106.4 million tonnes. The government has not been as successful in procuring wheat this year as before, as farmers preferred offering better prices to private agencies and exporters. There’s nothing wrong with that. In this way the market rewards the farmers.
The government struggled to reach the revised target of 19.5 million tonnes for procurement for this season. The target was about 56% lower than the original procurement estimate of 44.4 million tonnes.
Still, with an opening stock of 19 million tonnes, the government should order over 35 million tonnes of wheat. The buffer stocking norm for April 1 is 7.5 million tonnes.
Then why are the prices of wheat and flour increasing when there is no shortage? Because the government has not released its stock to cool the wheat prices. Food Corporation of India’s godown stocks just by being there can’t cool the prices. Shares have to be issued in the market in a calibrated strategy to reduce the demand-supply mismatch. The trouble is that government officials have traditionally been reluctant to issue stocks because it involves auctions of private players with a follow-up trail of corruption inquiries by the dreaded 3Cs: CVC, CAG, Courts.
India is not a significant wheat exporter but was expected to be different this year.
Prime Minister Narendra Modi told US President Joe Biden that India would supply from its bulging foodgrain stockpile if World Trade Organization rules are relaxed to allow exports of procured (not subsidized) food grains. Therefore, a hasty ban on wheat exports puts a question mark on India’s proposal to reduce the global food shortage.
Now, members of the G-7 countries are expected to appeal for lifting restrictions on wheat exports from India during the upcoming summit in Germany (June 26-28), which Prime Minister Modi is likely to attend, The Hindu has reported.
Moreover, soon after the hasty ban, the government was forced to announce certain exemptions to those wheat consignments that were handed over for scrutiny and registered in the system on or before May 13. was exported to.
It also let go of a wheat shipment to Egypt, which was already loading at Kandla port, after the Egyptian government sent a request not to come under the ban.
This flip-flop was unnecessary. A situation where there is global pressure to reverse the ban is also completely avoidable. Prudential use of FCI shares can cool the prices in the domestic Indian market without the need for wheat export restrictions.
The important question is, what is the point of maintaining mountains of grain reserves if grain will never be released in the open market?