Will India seize wheat export contracts missed by Russian-Ukraine?

With two major wheat exporters locked in a war, the world is now looking for countries that can fill the void. Will India be able to rise to the occasion? Can it overcome the logistical bottlenecks?

Topics


wheat | Export growth | wheat MSP


Bhaswar Kumar  | 
New Delhi 


Goods wagons carrying freshly-cultivated wheat sacks from parts of north are rolling in near Kandla port in a tad hurry now. They have to unload and come back again. War in Ukraine is clearly turning the fortunes back home. Wheat at Kandla port is being procured at over 2,400 per quintal now, about Rs 300 more than what it was a fortnight ago. While the government MSP is Rs 2,015 per quintal. So, it’s a win-win situation for everyone. Farmers are happy because they have started getting better rates for wheat than the government was offering them a few weeks ago. The government is happy as it will have to procure less wheat and its subsidy bill will plummet. Despite being the second-largest producer of wheat in the world, India accounts for less than one per cent of exports. Russia and Ukraine are major suppliers of wheat, accounting for about 30 per cent of the global supply. Now, with a war being waged between the two nations, wheat exports from Russia have come to a standstill and ports in Ukraine have halted commercial activity. This has left a gap that India is filling. Prime Minister Narendra Modi recently said that India should seize the opportunity to export wheat of the best quality, as demand surges amid Russia’s invasion of Ukraine. And, it appears that the government and other authorities concerned have decided to act. This comes at a time when India’s wheat exports have already been growing at a significant pace during the past few years. Let us examine where they are headed, what measures are being taken to give them a boost, and who are the major players involved. According to an agency report citing unnamed government sources, significant measures will be taken in next few weeks to establish India as a dominant exporter of high-quality wheat. Three primary measures will be implemented over the course of around two weeks. The first one is ensuring that government-approved laboratories test the quality of wheat for export. The second is ensuring that extra rail wagons are available for transport. And, the third one involves working with port authorities to give priority to wheat exports. Trade and market sources have told Business Standard that India’s opening stocks of wheat in the central pool as on first April 2022 are expected to be the lowest in the last three years.

But, they will still be much higher than the level required for maintaining a buffer and strategic reserve.

Both government and trade sources have said that in FY22, wheat exports will be about 7.25 million tonnes. This would be a record. In the upcoming financial year, exports might even touch 10 million tonnes if the current momentum is maintained. This also depends on global market conditions remaining benign and the outbound shipments don’t face any hassle. And, this opportunity comes at a time when India’s wheat exports were already rising at a fast clip. According to the Ministry of Commerce & Industry, India’s wheat exports surpassed 872 million dollars in the April-October period of 2021-22. They had touched 243 million dollars in 2020, against 50 million dollars in 2016. The current price of Indian wheat is the cheapest among all global competitors. This is good news for the private sector, which had already stepped up to boost wheat exports. Out of the nearly 7.25 million tonnes of exports in FY22, over 50 per cent has been done by ITC. Meanwhile, the rest has been shared between a clutch of multinational trading companies that include Olam Agro and Cargill. So, what are the challenges Indian traders will face if they want to export record quantities? Apart from sudden changes in global conditions, one of the only other bottlenecks in achieving exports of 10 million tonnes next year is if the government curbs exports to enable it to achieve the annual wheat procurement target for FY23. However, most analysts told Business Standard that in the coming financial year, the Centre might not have to purchase the full target for wheat if the current interest shown by private players continues. A lower procurement of wheat, along with lower carryover stocks, is sure to have an impact on the food subsidy for FY23, a good portion of which comes from wheat.) According to one report, in some parts of the country, commissioning agents and traders are seeking tax reliefs to cash in on the opportunity. For example, sellers in Punjab have reportedly been fielding enquiries from food retail giants and foodgrain exporters. But, even as the demand grows, high taxes could play spoilsport. Consider the 3 per cent each in market fee and rural development fund, along with the 2.5 percent commission to agents and 1 per cent service charges, that they have to deal with. So, in Prime Minister Narendra Modi’s words, Indian exporters have the golden opportunity to provide the best-quality product with the best service to the world. It should not be a stop-gap arrangement but Indian exporters should make it a permanent arrangement and take the Indian wheat export to above 15 million tons per year.

Watch video

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.


We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, March 18 2022. 08:15 IST