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India curbs wheat export as heatwave hits output, sharp rise in domestic prices

Updated on May 14, 2022 10:19 AM IST
The union government issued a notification on Friday night banning fresh exports of wheat. It said the step was taken in the interest of national food security.
India’s ban on wheat exports is likely to drive global food prices, which rose to record levels after Russia’s war on Ukraine. (HT Photo)

NEW DELHI: India has banned exports of wheat, abruptly reversing its policy to send shipments around the world to plug a global food shortage. The union government issued a notification on Friday night, clamping a total ban on fresh exports.

The move comes on the back of an estimated large drop in output due to a severe heatwave and a sharp rise in domestic food prices, especially of cereals.

The notification by the directorate general of foreign trade said the step was taken in the interest of national food security.

The curbs will not affect export orders already contracted by private traders and for which letters of credit have been issued.

“Export will be allowed in case of shipments where an irrevocable letter of credit is issued on or before the date of notification. Export will be allowed on the basis of permission granted by the government of India to other countries to meet their food security needs and based on the request of the governments,” the notification said.

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India’s ban is likely to drive global food prices, which have risen to record levels due to void in wheat supplies after Russia’s war on Ukraine.

The country was hoping to export large quantities as the government had forecast a record output of 111 million tonne of wheat in February. A month-long heatwave from mid-March shrivelled the winter staple, forcing the government to cut production estimates by at least 5.7% to 105 million tonnes.

Earlier, Prime Minister Narendra Modi had said “India was ready to feed the world” by exporting its surplus stocks.

Wheat prices have risen to record levels, rising 6.95% on-year in April, which is a decadal high on the back of lower output and brisk buying by private traders at higher than government-ordained minimum support prices of 2015 a quintal (100 kg) in anticipation of robust export demand.

Lower output has put pressure on the government to meet its requirement of grains for subsidised grains. The unexpected output drop has forced the government to lower its own target for purchases of wheat to just 19.5 million tonne from 44 million tonne earlier.

Just a week ago, food secretary Sudhanshu Pandey said the country had surplus stocks and he did not see any possibility of curbs on wheat exports.

India’s estimated wheat output this year remains mired in confusion after a severe heatwave in mid-March cut yields of the main winter staple the country was hoping to export in large quantities to fill a global shortage due to the Ukraine war.

India’s consumer inflation surged to an eight-year high of 7.79% in April, 2022, breaching the Reserve Bank of India’s (RBI) so-called tolerable limit of 6% for the fourth straight month, official data Thursday showed. Food inflation, which is driving the rise in retail inflation, rose by 8.38%, the highest so far in this fiscal.

An emerging issue, according to analysts, is whether India can afford to export wheat without restrictions and if the country will witness a further spike in domestic food prices.

India exported a record 7.85 million tonnes in the fiscal year to March, up 275% from a year ago. A crimped output can now create a tight supply situation in the coming months, analysts said.

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