Why is India curbing flour exports after wheat ban in 2022?
After the wheat ban, why is India curbing flour exports? Was it necessary?
Wheat flour export ban
Following the wheat ban, the Center issued limitations on the the export of wheat flour and related products such as maida, semolina (Rava/Sirgi), whole atta and resulting atta.
According to a statement from the Directorate General of Foreign Trade, the decision will take effect on July 12 (DGFT). According to the July 6 DGFT notification, all exporters must obtain prior approval from the inter-ministerial wheat export committee before initiating any outbound shipments.
Under this notification, the provisions of the Foreign Trade Policy regarding transitional arrangements would not apply. India exported wheat flour worth USD 246.57 million in 2021-2022. India banned wheat exports in May in a bid to depress prices, fearing a sweltering heat wave could negatively affect wheat production.
Earlier, the United Arab Emirates (UAE) imposed a four-month shutdown on exports and re-exports of wheat and wheat flour from India. The Gulf nation’s action comes after India banned wheat exports last month to slow rising domestic prices.
According to the DGFT, the disruptions in the global supply of wheat and wheat flour have led to the entry of many new players, variations in price and potential difficulties related to quality. According to the notification, it is essential to maintain the quality of Indian wheat flour exports.
Although there are no clear restrictions on the export of wheat flour, exporters must obtain approval from an inter-ministerial wheat export committee.
In addition, certain wheat flour shipments will be permitted to be exported prior to the implementation of this revised policy, such as when the loading of wheat flour onto the vessel began prior to this notification, and the shipment of wheat flour has been handed over to Customs and is recorded in their system.
However, in May 2022, the Center changed its wheat export policy and designated grain shipments as “prohibited”.
According to the administration at the time, the decision was made to manage the country’s overall food security as well as to meet the needs of vulnerable neighbors and other nations.
Why are there export restrictions on wheat flour?
The move is seen as an effort to combat inflation, 6-year lows in production, inadequate CFI supply, and the effects of the Russian-Ukrainian war.
With immediate effect, the Indian government has restricted wheat exports to address a number of challenges, including lower-than-expected production and soaring inflation, both of which are primarily linked to the Russian-Ukrainian war.
Although there is no explicit ban on the export of wheat flour, exporters must obtain permission from an inter-ministerial wheat export committee.
In addition, prior to the implementation of this revised policy, certain shipments of wheat flour may be exported, including situations where the loading of wheat flour onto the vessel began prior to this notification and where the shipment of wheat flour of wheat has been turned over to customs and entered into their system.
In May 2022, the Center amended the wheat export policy, categorizing it as “prohibited”.
The administration later said the decision was made to manage the country’s overall food security as well as to meet demands from neighboring countries and other vulnerable countries.
Following wheat export regulations, flour exports surged. This impacted the local market price and raised the possibility of quality difficulties.
Because the government was constantly monitoring the situation, the notification went into effect.
Exported wheat flour shipments will be allowed from July 6 to July 12 for those that were loaded or started loading wheat flour on the ground before the announcement.
Wheat flour shipments tendered to customs prior to this notification will also be permitted to export.
The export of wheat flour is subject to the recommendation of the Interministerial Committee (CIM) for the export of wheat.
The main measures have been taken to control price growth and ensure the availability of consumer stocks.
According to the Ministry of Food, India exported 95,167 tons of wheat flour (atta) in April 2022, compared to around 26,000 tons in April 2021, an increase of almost 267%.
Meanwhile, exporters of wheat products in small consumer packs of 5 and 10 kg have approached the Ministry of Commerce, asking that they be allowed to export freely and without restrictions.
Small exporters claimed that any restrictions on the sale of these products would be a big disaster because they had built their business in close contact with foreign buyers. According to them, about 75,000 tons of wheat flour and related products are exported annually in small packages.
Overall, India exported nearly 7 million tons of wheat in FY22, worth over $2.12 billion, an increase of 274% from the same period last year.
However, according to official records, approximately 4.5 million tonnes of wheat had been under export contracts up to the time of the FY23 restriction.
In April 2022, 1.47 million tons were delivered, while 0.24 million tons were shipped in April 2021. According to experts, if exports had not been banned, India could have exported 8 to 10 million tonnes of wheat.
Point of view:
In response to rising world prices, India banned wheat exports on May 13. However, it kept open the G2G supply potential for neighboring countries and people who would be at risk of food poverty.
Since halting wheat exports on May 13, India has transferred 1.8 million tonnes of wheat to at least a dozen countries, including Bangladesh and Afghanistan, according to Food Secretary Sudhanshu Pandey .
Following the wheat ban in May, the Center declared limitations on the export of flour and related products such as maida, semolina (Rava/Sirgi), whole atta and resulting atta .
Now the government has banned wheat flour to tackle several issues prevalent in the economy. But was it necessary to impose such prohibitions again and again?
This will make it more difficult for the country, in the long term, to create markets for its agricultural products.
The abrupt decision was made when the government decided not to buy as many basic foodstuffs this year as it usually does for a major food security program that serves some 800 million people.
This was partly due to reduced crop yields as well as farmers selling more wheat to private traders this year, who paid more for it as they expected strong exports.
Although estimates vary, farmers estimate that the heat wave in early March reduced their harvests by 15 to 20%.
The ban has also hurt farmers who expected to benefit from higher world prices this year. It was a double tragedy for them. They have suffered because their crops have been hampered and they are currently unable to take advantage of rising world prices.
Farmers are the most affected by these bans because if harvests are hampered, how will they be able to cope with agricultural needs and demands. The government must understand and consider all related aspects before imposing any law, amendment or decision.
Contrary to a commitment of 50,000 tons, he claims that 33,000 tons of wheat had already been sent to Afghanistan as humanitarian aid.
In order to maintain domestic price stability, the government also announced that it would limit sugar exports to 10 million tonnes. After Brazil, India is the second largest sugar exporter in the world.
Such limits are seen as a kind of “food protectionism” at a time when the world’s resources are becoming increasingly scarce, and when the United Nations has warned of the risk of a global food shortage in a near future.
The wheat restriction, however, has generated the most debate and calls for its reinstatement.
Edited by Prakriti Arora