On Thursday, there were media reports that the Indian government has temporarily banned wheat exports with immediate effect. The media reports insinuated that the Modi government’s decision is anti-farmer as it has denied the farmers the opportunity to sell their produce at much higher global rates.
The global agriculture market has been volatile ever since Russia launched special military operations in Ukraine, a major wheat-producing nation and a significant supplier to the European market. As a result, wheat prices have increased due to short supply and increased demand in the global markets.
The sudden spike in the prices has affected smaller and poor countries, which are not only finding it tough to procure wheat from global suppliers but are also hampered by high import bills. Anticipating the instability and price fluctuations in the global agricultural market, the Indian government has taken a prudent step to enforce export control orders on wheat.
However, the media has been spinning the decision to portray that the Indian government is denying Indian farmers an opportunity to sell their produce at higher prices in the global markets. Besides that, the media has been claiming that the government is banning export for the reasons of “food security”, alluding that the Modi government may not have sufficient buffer stocks of wheat to cover up the additional requirement of grains in future in case prices of grain continue to soar up in coming months.
Some ‘experts’ also criticised the government’s move saying that the decision by the government is a loss of face for India as it cuts short the aspirations to feed the world. The ‘experts’ claimed that the ban on wheat exports to neighbouring countries reflected poorly on its crop intelligence capabilities and the image of being a reliable global supplier.
Some not-so sharp commentators with no idea about global trade also had a point to make. Tehseen Poonawalla, the Congress party sympathiser, took to Twitter to ridicule the Modi government, saying that they have been making tall claims recently that India will supply wheat to the world. He mocked the government, saying a few days later, the government took a decision to ban wheat export.
“Just like the ban on vaccine exports after tall claims to the globe! GoI is an embarrassment!” Tehseen tweeted, citing PM Modi’s recent statements that India would supply the wheat to the world.
However, the claims put out by the media, ‘experts’ and opposition party supporters that the Modi government has failed to manage the ongoing instability in the global agricultural market effectively is not entirely true.
Ban on wheat exports based on multiple factors
The decision to impose a ban on wheat exports by the Modi government is not hasty as being portrayed by a section of the media but rather based on multiple factors.
In the order banning the export of wheat, the Ministry of Commerce and Industry has stated that there is a sudden spike in the global prices of wheat arising out of many factors, and the Government of India is committed to providing for the food security requirements of India, neighbouring and other vulnerable developing countries which are adversely affected by the sudden changes in the global market for wheat and are unable to access adequate wheat supplies.
Apart from national requirements, the order also cites the priorities of the South Asian neighbourhood in dealing with the spike in global wheat prices. The emphasis on the neighbourhood in the official notification also shows that India is aware that a shortage of wheat in the domestic market can create hit the neighbouring economies.
More importantly, the order clearly states that the government of India is not backtracking on its promise to deliver wheat to the neighbouring and vulnerable developing countries as promised before. Hence, there is no loss of face for India, as suggested by some ‘experts’, who had expressed doubts over India’s role as a reliable global supplier. In fact, just recently, the Indian government donated wheat to Afghanistan and Sri Lanka amidst the ongoing domestic crisis in both countries.
Secondly, to manage the overall food security of the country and to support the needs of the neighbouring and other vulnerable countries, the Modi government has made several other arrangements. The order states that the export of wheat will be allowed “in case of shipments where Irrevocable Letter of Credit (ICLC) has been issued on or before the date of this Notification”.
Further, the export will also be allowed on a Government to Government (G2G) basis only after securing the necessary permissions. Hence, if and when India wants to buy or sell more wheat, the centre can always intervene in the global market to stabilise the domestic market prices if needed.
In addition, there are enough buffer stocks of wheat in the country that is necessary to manage the supply of wheat in the domestic market if the availability of wheat in the international market is affected. As per the data released by the Food Corporation of India, the buffer stocks of wheat currently stand at 303.46 lakh MT against the minimum buffer stocks requirement of 30 lakh MT.
Hence, there is no question of a shortage of wheat in the country for the foreseeable future, as claimed by a section of media.
China factor behind the export ban on wheat
The government sources speaking to OpIndia also confirmed that there is also China factor behind the sudden decision to ban the export of wheat.
The senior officials in the Ministry of Commerce and Industry said that there is a sudden shortage of wheat worldwide, and China is using this opportunity to hoard wheat. They added that China is importing wheat on a large scale to store it to disrupt the global market soon.
For China, the sucking up of wheat available in the global market provides two advantages. One, it can store the wheat for a short time and divert it to its allies in the coming days or sell it at a higher price. Secondly, by hoarding it, China can effectively control the market prices of wheat globally. With its huge foreign exchange reserves, China can purchase the wheat stocks at a higher price, only to control the wheat market in the coming days, hindering smaller and vulnerable developing countries from buying the necessary wheat.
With India continuing to flood international markets with wheat, it will lead to higher purchases by the Chinese, especially the Indian wheat. This will only aggravate the problem as China will dictate the supply of wheat at a time when there is a glut in the supply. It is notable that India is second largest producer of wheat, while China tops the chart.
Hence, considering the strategic objectives, the Government of India has taken preventive steps to stop China from hoarding Indian stock and has decided to ban wheat exports. The prudent step by the Modi government is being hailed as pro-poor as this will only benefit the poor and ensure affordable prices of wheat in the domestic market.
