Ban on Indian Wheat Exports Deprives income to Farmers But Profits Traders and Exporters

 In 2020 present NDA government while bringing  three farm laws said they are intended to facilitate fair markets and enhance farmers incomes. Exactly opposite the government acted by banning exports all of a sudden when global wheat prices are attractive and watered down the hopes of Indian wheat farmers.

In the context of Russia- Ukraine war (both the nations account to  nearly 25 percent to global wheat trade), world wheat prices skyrocketed to $ 450 a ton from $160 a ton in 2018.  In 2021-22 India harvested a record 31.51 cr tons of food grains. After recent Rabi harvesting, wheat production stands at 10.6 cr t (106.41 Million Metric Tons), only a shortfall of 3.18 MMT from previous year, caused by recent severe heat wave in March. Besides as on  early April FCI godowns were overflowing with  1.9 cr tons of wheat against buffer stock of 7.4 MMT and rice of 13.5 MMTs.

Attracted by high  world market prices Union ministry of Commerce  hoping to earn a windfall of earning $ 10 bln  by exporting 15 to 20 million tons. Even our Prime Minister Modi gloated in early May during his Europe tour that India can export wheat and even feed the world in these hard days. Then came a sudden ban of wheat exports from Government of India, just within 10 days after our Vishwaguru  boasted. This move did upset many importing developing nations, in dire need and faced serious criticism from G 7 and other World bodies. The ban has also attracted wrath of North Indian farmers deprived of reasonable incomes at a time prices are attractive both in domestic and world markets. Against Government announced support price of Rs. 2050 per quintal,  in open market the prices increased by 25 % and they could sell to grain traders up to  Rs  2400 a ton. The ban also sent shock waves to exporters as thousands of wheat trucks came to a halt in Kandla and other ports. Realizing chaos at ports and confusion over committed export orders after three days  GOI  has allowed temporarily export of wheat to complete shipments of committed orders. With only 4.5 MMT  of wheat exported till 13th May, when the ban was announced against the ambitious target of 15 MMTs, by then serious damage was done to us as a reliable player in world markets.

Plummeted FCI Procurement

This year  FCI  set target is  44 million tons. By the third week of May, the very end of season, it could procure only 19.5 million tons against last year’s procurement of 43.44 million tons. With attractive price of 2,400 against in open markets farmers did not prefer FCI procurement  price of  mere Rs. 2,050 a quintal  It is striking that by May 10, the Food Corporation of India (FCI) has procured just 5.51% of all wheat procured by official agencies. The low procurement will seriously affects maintenance  stocks to support much needed Public Distribution System (PDS) to poor. In fact FCI’s share of procurement has been declining ever since Modi came to office in 2014. This is the lowest-ever level for the FCI’s wheat procurement operations.

Plummeting Wheat Procurement over the years.

wheat procurement

How Grain traders are benefiting

FAO has just declared that available global wheat stocks would only be sufficient for next 2 months and fears serious food shortages especially in grain importing developing countries. By the day export ban was announced private traders have already mopped up a larger share of available grain in markets and horded in large volumes. Expecting big surge of prices in domestic and global markets, they are waiting for an opportunity. FCI unable to meet it’s procurement targets and resulting reduction of PDS  commitments, ultimately poor will suffer. Present Modi government has brought anti farmer & people farm laws by lifting food hording limits under Essential Commodities Act to benefit private traders, super market supply chain and exporters. Already Reliance and Adanis have built silos in Ludhiana and Haryana with capacity to hoard millions of tons of food grains including vegetable oils. Another farm law deliberately  encouraged trade outside APMC mandis  in the name of free markets to allow private corporate grain traders to dictate prices to farmers. As a result FCI procurement for PDS plummeted. Present and past regimes are bent over complete  privatization of food production, markets and distribution and hand over to large corporations and foreign multinationals. Today marketing and prices of  wheat flour, dal and  vegetable oils is controlled by a few corporations such as Adani, ITC  and Reliance. Globally Grain and vegetable trade is controlled by four MNCs- ADM, Bunge, Cargill and (Louis) Dreyfus, which account for between 75% and 90% of the global grain trade, according to estimates according to Guardian, UK.

The ulterior motive of Union government behind imposing export ban appears to wait for high prices in world market and then lift the ban so as to benefit domestic  grain traders and exporters, who alrady acquired and horded huge volumes of grain.

Union government is procuring grain from farmers by not even paying cost of production. The cheaply procured grain is used by present regime to supply free ration at the time of state election to win the elections. This clearly demonstrates level of hunger prevailing in the country. Food grains should be procured at prices profitable to farmers to ensure sufficient food stocks for provision rations at affordable  prices under PDS to poor.

The special programmes — the PM Garib Kalyan Anna Yojana and special schemes for migrant workers as well as Covid relief packages — accounted for more than 30% of ALL allocations in 2020-21 and 37% in 2021-22. There is a worry that the shortfall in wheat production and procurement may be used as an excuse to limit the continuation of these expanded programmes of support.

The alternative

Union government should immediately announce a bonus of least Rs. 500 per quintal. Subsequently the MSP on wheat per quintol should be hiked to Rs. 2800. This would not only compensate farmers for the crop losses they had suffered but also for the escalating cost of inputs, most significantly, fertilizers. These actions would benefit our farmers from sharing export benefits and ensure sufficient grain stocks for PDS to provide food security to poor in the country.

To a government that was committed to allowing an unfettered role for private trade in agricultural markets — illustrated by its stubborn pursuit of the three controversial farm laws, which it was forced to withdraw in the face of unprecedented opposition from the Indian peasantry — the decision to export wheat would appear to be logical. To Indian farmers, the situation offered a rare opportunity — after years of low output prices — to increase their incomes following the surge in prices. However, what is inexplicable is the Modi Government’s utter unwillingness to pay a higher price in order to ensure food security.

Dr. Soma Marla, Principal Scientist, ICAR , New Delhi


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