Govt Likely To Continue With Wheat Export Curbs Amid Elections: Report

In May last year, India restricted the export of wheat to enhance domestic availability. The decision was due to unprecedented heat drying out crops and reduced output

The increased demand for wheat flour overseas led to a significant price rise of the commodity in the domestic market.

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Several state elections in 2023 and the general election in 2024 will likely pursue the Center to extend export curbs for wheat this year, according to a Bloomberg report. In May last year, India restricted the export of wheat to enhance domestic availability. The decision was due to unprecedented heat drying out crops and reduced output, raising concerns about local supplies.

The government later put restrictions on the exports of rice and sugar due to similar concerns.

Another reason for the curb is linked with the Russia-Ukraine war. Before the war broke out, Russia and Ukraine were major exporters of wheat, accounting for almost one-fourth of the global wheat trade. The conflict between the nations triggered global wheat supply chain disruptions, thus increasing the demand for Indian wheat. The increased demand for wheat flour overseas led to a significant price rise of the commodity in the domestic market.

Poornima Varma, an assistant professor at the IIM, Ahmedabad told Bloomberg, though food inflation didn’t affect the ruling party’s electoral prospects in assembly elections in some states including Uttar Pradesh and Gujarat, it doesn’t want to take any chances ahead of future polls and the general election next year as higher food prices always hurt consumers. 

She added that grain prices in India have not come down as much as expected, with wheat costs dropping only marginally, and the government wants to have sufficient domestic inventories to ensure food security for the poor. 

According to the report, state wheat reserves have also shrunk to the smallest for this time of year since 2017 due to the free grain program started during the pandemic. 

Another reason to extend the curb could be unpredictable weather. While the agriculture ministry and some traders expect the country’s wheat production to reach a record 112 million tons this year, it’s still too early, the report said. 

Output is at risk if temperatures in the key northern growing regions climb unexpectedly through to the end of March, said Rajnikant Rai, divisional chief executive of ITC Agri Business told Bloomberg. 

“The crop is looking good as of now but we have to watch the temperatures, a removal of the export ban is unlikely because of low stockpiles,” he added. 

According to Rajnikant Rai, any move to relax the curbs now would boost the domestic market and make it difficult for the government to buy the grain at minimum support prices to replenish supplies for its welfare program.

Inflation is still a concern. After easing in the fourth quarter, it increased once more in January. For the sixteenth consecutive month, core inflation, which excludes the cost of food and fuel, remained above 6 per cent. The government's challenge to lower prices before the elections is highlighted by this, the report said.