Context: Recently, Union government has banned the exports of wheat, earlier preparing to send delegations abroad to boost the country’s wheat exports.

However, there are certain conditions, under which exports will be allowed:

• First, where an irrevocable letter of credit has already been issued.
• Second, one window has been kept open for the neighboring countries in the notification. It says export will be allowed to other countries “based on the request of their governments”. It will be helpful in ensuring supplies to Sri Lanka, Bangladesh, and Nepal.

Factors that led to the ban on exports of wheat in India

• Heatwaves at the end of March, have impacted the production of food grains, especially in northwest India.
• The government has revised the wheat production estimates, lowering them by 6 million tonnes.
• Wheat prices have increased nearly 20% and prices of essential food items such as Atta has risen nearly 15% last year.
• The government has given its reasons for export ban, i.e. to check prices and curb hoarding.

Key implications of the wheat exports ban

• First, India is the world’s second-largest wheat producer and countries were expecting India to fill the gap created due to the Ukraine-Russia war.
• Agriculture ministers from the G7 condemned India’s decision to withhold wheat exports amid a global grain shortage.
• Second, Indian wheat traders have lost the opportunity to gain from the global grain shortage. Building export markets and establishing supportive infrastructure, like warehousing, takes time. Such policy decisions will create more difficulties in it.
• Third, it will be a loss for farmers as well because the market price of wheat had become higher than MSP. Many farmers were preferring to sell in the market. It led to the highest purchase of wheat by private traders in Punjab in the last 8 years.
• Fourth, it will raise questions about the farm trade policy’s credibility. Signs of low output due to March heat were already visible, still, the delegation was sent abroad by the commerce ministry with the slogan Indian farmers “feeding the world”

Issues with the ban

• This ban has impacted the credibility of India as a reliable supplier of anything in global markets.
• It conveys that we don’t have any credible export policy as it can turn its back at the drop of a hat.
• More interestingly, it also reflects a deep-rooted consumer bias in India’s trade policies.
• It is this consumer bias that indirectly becomes anti-farmer. This ban deprives farmers from profit-making.
• It only shows the hollowness of agri-trade policies and dreams of doubling agri-exports.
• The export ban also reflects poorly on India’s image in playing its shared global responsibility amid the Russia-Ukraine war.

Road Ahead

• It may be recognised that inflation is a global phenomenon today caused by excessive liquidity injected by central banks and loose fiscal policies around the world. India’s wheat export ban will not help tame inflation at home.
• The Government could have announced a bonus of Rs 200-250/quintal on top of MSP to augment its wheat procurement. The govt could have calibrated exports by putting some minimum export price (MEP).