India may extend its ban on wheat exports beyond March and continue curbs on overseas shipments of non-premium varieties of rice to cool local prices and expand the government’s purchases of cereal stocks, which are at their lowest level in five years, two people familiar with the development said.
The government banned wheat exports in May last year as overseas sales from the world’s second-largest producer rose due to the Ukraine war at a time when production fell 2.5% due to a heatwave, straining availability.
An interministerial decision on whether to open exports is due in March but recent inputs on supplies, prices, availability and output scenarios point to a likely continuation of restrictions on cereal trade, the people said, declining to be named.
“There is a need to focus on procurement, geopolitical situation is uncertain and the country’s own food security is the first priority,” one of the persons said.
Domestic wheat prices rose to a record ₹32,500 per tonne in January, way above the government-set minimum support price of ₹21,250.
Output of wheat, to be harvested in March, is expected to be a record 110-111 million tonne in 2023-24 on the back of higher acreage, according to official projections. However, weather has to be conducive throughout. “Inputs from the India Meteorological Department will be taken into account,” the second official said.
Prospects of an early summer can’t be ruled out as the country faces increasing heatwaves due to climate-induced changes. In February, minimum temperatures in wheat-growing northwest India is “most likely to be above normal”, the weather bureau said in a bulletin on February 1.
Despite several interventions, high wheat prices have cascaded on to everyday essentials, such as atta (flour) and bread. To cool prices, the government decided to sell 3 million tonne of wheat in the open market. India’s curbs on food exports also stoke global prices, as the country is the world’s biggest overseas seller of rice.
Higher prices of the staple boost farmers’ and traders’ incomes, but hurt consumers. They also impact the government’s purchases, or procurement, because growers prefer to sell to private markets for higher margins rather than to state-run silos, which offer only floor prices.
Such a scenario last year led to a sharp 58% decline in the government’s wheat procurement to 18.8 million tonne from the previous year’s 43.3 million tonne. Procurement is onerous because the government this year will provide free grains of 5kg a month to about 800 million beneficiaries under the National Food Security Act, 2013.
Restrictions on rice export are likely to continue for much the same reasons. In September, India imposed a 20% tax on export of various grades of rice, excluding the premium basmati variety, as stocks declined.
There is a high probability of the El Nino weather pattern, associated with a poorer south-west monsoon, returning this year, although scientists say that it was premature to gauge its impact on the summer rains, which are critical for paddy and the overall economy.
There is an almost 50% probability of El Nino conditions prevailing during summer months of June, July and August, and a 58% probability in July, August and September, according to the latest estimates of the US National Oceanic and Atmospheric Administration released Thursday. Both these numbers are higher than the chances of a neutral condition, HT had reported last week.
