Posted on January, 10, 2023 at 09:41 am
The Narendra Modi government is said to be exploring the possibility of lifting its ban on wheat exports imposed last May. The apparent rationale for its reconsideration is the discontinuation of the Pradhan Mantri Garib Kalyan Yojana, which provided 5 kg of free rice or wheat to ration cardholders in addition to their existing monthly entitlement under the National Food Security Act. The scheme’s non-extension after December has certainly reduced the requirement of grain for the PDS, thereby opening a window for restoration of normal trade. India shipped out record quantities — 7.2 million tonnes (mt) of wheat and 21.2 mt of rice — in 2021-22, along with all-time-high 105.2 mt of the two cereals being channeled through the PDS. Clearly, both together were not sustainable. Given that the extra free-grain scheme has ended — it was specifically intended as a post-Covid distress alleviation measure — exports can potentially be allowed.
But the Modi government is unlikely to lift the ban soon for three reasons. First, wholesale wheat prices are currently around Rs 28 per kg in Delhi, as against Rs 20 a year ago. Retail cereal inflation, at 12.96 per cent in November as per official data, is also far too high. Second, public wheat stocks, at just over 19 mt on December 1, were the lowest in six years for this date. It limits the government’s ability to undertake open market operations in the event of any price rise. Third, the next wheat crop will start arriving in the markets only towards end-March. Although farmers have sown an unprecedented 33.2 million hectares area this time, no realistic assessment of production can be made now: One must be wiser from last year’s experience, when a sudden spike in temperatures after mid-March took a heavy toll on yields. The export ban was forced only due to government wheat procurement plunging to 18.8 mt, from the previous year’s 43.3 mt.
That said, it’s good if the government is thinking in terms of re-allowing exports. Trade restrictions should be resorted to only in extreme situations. Last year’s ban was sudden, coming just days after the commerce minister’s claims about Indian farmers “feeding the world”. It dented the country’s image as a reliable supplier. One must hope for a bumper crop and India reentering the world market at the earliest.
Source: India Express