India's wheat dilemma - continue exporting while keeping local prices stable

India is in a quandary as it seeks to keep wheat exports open to address a global shortage caused by the Ukraine war while ensuring domestic prices are stable as stocks are being diverted for exports.

As the world's second-largest wheat producer, India is under pressure to help ease wheat shortage because of substantial grain exports being blocked from both Ukraine and Russia at this time.

The Indian government has cut its estimates of wheat production by 5.7 per cent to 105 million tonnes, from 111.32 million tonnes, for the crop year ending June, due to a heatwave including in key wheat growing areas.

Temperatures rose above 45 deg C last month in the north, making it the hottest April in 122 years for north-west and central India.

"(In the) last three years, we had ample stock and surplus production. This year, things have totally changed," said Mr Navneet Chitlangia, vice-president of the Roller Flour Millers Federation of India.

Wheat prices have climbed 11 per cent from March to April even as India faces growing inflation.

"There is a chance there will be a crisis in December, January or February," he said, noting reports of people and companies stockpiling wheat even as farmers withhold stock to get higher prices. Some farmers in Rajasthan and Madhya Pradesh states have also shifted from cultivating wheat to more profitable oil seeds.

"The government needs to put a cap on exports at some level so that the domestic market can be catered to comfortably. Then there will be stabilisation in the domestic market," he added.

However, the government has maintained that India is in a comfortable position. Traders had been contracted for four million tonnes through May and June for export, with one million tonnes exported so far.

"We don't see a case for any control on exports... Wheat exports are on and in fact, the government is facilitating the traders," said Food Secretary Sudhanshu Pandey last week in a press conference.

He said wheat from Argentina would arrive in the market by June, easing the pressure on India.

In India, the government buys millions of tonnes of food grains from farmers every year through the Food Corporation of India. These range from wheat to paddy to pulses, and they are then distributed at affordable prices for as low as two rupees (four Singapore cents) per kg through the public distribution system to the poor.

The government also keeps buffer stocks to tide the country over any food emergencies.

Now, with farmers getting higher prices in private sales, the procurement by the government has fallen to around 18 million tonnes, half of the wheat procured last year.

New Delhi has said this is enough to cover those under welfare schemes but some have urged caution, considering the unpredictability in the global situation and potential that production could fall below even the latest estimate.

"We have no other option to ensure we have adequate supplies six months down the line," Mr Devinder Sharma, a writer and columnist specialising in agriculture, told The Straits Times.

He noted that in 2006 to 2007, India had been forced to import wheat at double the price following a shortage due to increased exports and the government selling excess stock at subsidised rates to traders in the preceding years.

"There is no harm in keeping a surplus," said Mr Sharma.

Still, wheat exports are tied to global food security.

Prime Minister Narendra Modi said during a visit to Germany that "at a time when the world is facing a shortage of wheat, the farmers of India have stepped forward to feed the world".

The Russian war in Ukraine has led to about 13.5 million tonnes of wheat stuck between the two countries, according to the United Nations' World Food Programme. The two countries combined account for almost a 30 per cent share in world exports.

"The time has come for India to be an international player in wheat," said Professor Prabina Rajib from the Indian Institute of Technology, Kharagpur.

"By doing so, not only Indian farmers are benefiting, India is also showcasing its agricultural prowess to reduce global prices."

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A version of this article appeared in the print edition of The Straits Times on May 14, 2022, with the headline India's wheat dilemma - continue exporting while keeping local prices stable. Subscribe