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Why Government Restricted Wheat Flour Exports?

Government

Government of India has put restrictions on Wheat Flour Exports due to rising prices. The decision was taken to ensure food security and curb the rising prices.

Wheat Exports by India

  • India has exported around 30 lakh tonnes of wheat in 2022 so far. Indian Government is receiving requests from some of the countries for the supply of the grain.
  • In May 2022 the central government had put restrictions on wheat export and had announced that it would allow wheat exports only on case to case basis.
  • There were few requests which where agreed like Bangladesh was supplied 1.5 lakh tonnes of wheat. The continuous price rise in wheat and Aata prices has compounded worries of flour millers. They are demanding that wheat should be sold in open market to control prices.
  • The Flour millers feel that by selling wheat in open market the hoarded wheats will come to the market. The availability of wheat in the open market has been reducing day by day.
  • In January 2021, India’s wheat exports were worth $80 million, which reached $304 million in January 2022. India’s exports increased by a whopping 387 per cent in April-Jun 2022 YoY.
  • The top ten importing countries for Indian wheat in 2020-21 are Bangladesh, Nepal, United Arab Emirates, Sri Lanka, Yemen, Afghanistan, Qatar, Indonesia, Oman and Malaysia.

Why Wheat Prices started shooting up?

  • India’s ban was announced on 13 May, after unseasonably hot weather affected the wheat crop, sending local prices soaring.
  • Although India is not a major wheat exporter, the move unsettled global markets with the Chicago benchmark wheat index rising by nearly 6%.
  • Wheat prices had risen throughout March and April after the Russian invasion of Ukraine, as had the prices of other foodstuffs.
  • Apart from the war in Ukraine, the weather has had an impact in some major wheat-exporting countries. Drought, floods and heat waves threaten crops in some other major producers.
  • Global wheat production for the 2022-23 period will be the lowest for four years, and global stocks of wheat are predicted to be at their lowest for six years.
  • There is still uncertainty about the actual state of the harvest, and whether or not it will be badly affected.
Government decided to Ban Exports
  • The cabinet committee on economic affairs led by Prime Minister Narendra Modi approved changes in the policy that will allow the government to restrict exports of wheat flour.
  • The primary reason for Curbing Exports by Indian Government was price rise in domestic market.
  • Global wheat prices rose more than 40% since the beginning of the year due to Russian invasion on Ukraine.
  • Before the war Ukraine and Russia accounted for major wheat and barley exports. However since Russian February 24 invasion, Ukraine ports have been blocked and civilian infrastructure and grain silos have been destroyed.
  • India also suffered due to record-shattering heatwave . Even though India produces copious amount of wheat most of the consumption happens within the country.
  • India earlier had set a goal of exporting 10 million tons of the grain in the 2022-23 with the aim of finding new markets for its wheat in Asia.
  • But however the sudden rise in temperature in Mid-March meant crop size previously anticipated by India would be smaller than expected.
  • This forced Government to rethink its decision of exporting and focus on own needs. While India is no longer going to supply wheat to the world, the ban by government is not a blanket suspension of exports.
  • Moreover all exports deal signed and agreed before the directive was issued would be honoured.
  • The center also said that the ban on exports of wheat was not in perpetuity and could be revised in the future.

Criticism for Banning Wheat Exports

  • Several countries criticized India for Banning Wheat exports . Agriculture ministers from the Group of Seven industrialised nations condemned India’s decision to ban unapproved wheat exports in a joint statement.
  • The Agricultural ministers also recommended the topic to be addressed at the G7 summit in Germany.
  • India is justifying that ban on wheat exports is not a crisis driven reaction but a calculated measure to keep domestic prices in check
  • There is no wheat supply crisis in the country, but governments decision will help in controlling rising domestic prices and meeting the food requirement.
  • In short the primary reason for the ban was to control inflation. Food being a sensitive item for every country because it effects everybody. Also India does not want foreign countries to hoard Indian wheat for price manipulation in global market.

 

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