Context

The Government of India announced a sudden ban on export of wheat on May 13, 2022, a few days after Prime Minister Narendra Modi had stated that “at a time when the world is facing a shortage of wheat, the farmers of India have stepped forward to feed the world”.

What led to the sudden wheat export ban?

• Low public procurement: The sudden turnaround in the export policy appears to be on account of fears that low public procurement would affect domestic food security.
• This summer, procurement of wheat by the Food Corporation of India (FCI) has been very low.
• Last year, the FCI and other agencies procured 43.34 million tonnes of wheat.
• For the current season, procurement has only been 17.8 million tonnes, as of May 10, 2022.
• Given the low levels of procurement, the Government has reduced the procurement target for the current season from 44.4 to 19.5 million tonnes.
• Low production: While wheat production this year has been lower than estimated on account of high heat and other factors in March, there is not a big shortfall in production relative to previous years.
• Wheat production was 103.6 million tonnes in 2018-19, 107.8 million tonnes in 2019-20, and 109.5 million tonnes in 2020-21.
• The most recent estimate of production for 2021-22, revised downwards from the earlier estimate, is 105.

Public procurement in India

• The system of public procurement has been in place since the mid-1960s, and has been the backbone of food policy in India.
• As part of the liberalisation policy, many other economists suggested that food stocks be run down in India and that needs of food security be met through world trade and the Chicago futures market.

Need for effective PDS

• Higher than buffer stock norm: Stocks of wheat in the central pool as of April 30, 2022 were 30.3 million tonnes, much lower than the 52.5 million tonnes of last year, but comfortably higher than buffer stock norms.
• While the Government procurement in this marketing season has been lower than the previous two years, the stock position so far is similar to 2019, when we had 35.8 million tonnes of stock in April.
• An important role in pandemic: In the two COVID-19 years (2020-21 and 2021-22), the Public Distribution System (PDS) played a stellar role, and, its role showed the wisdom of not dismantling it.
• Total offtake of rice and wheat was 102.3 million tonnes in 2021-22 when distribution through the PDS and other welfare schemes is combined.
• It is essential that the PDS and open market operations be used to cool down food price inflation.
•  While most States have high inflation rates, States with better PDS, such as Kerala and Tamil Nadu, have low inflation rates.

Way forward

• Provide remunerative prices: To promote production, a key aspect of food policy in India has been to provide remunerative prices to farmers.
• As is well known, after the reports of the National Commission on Farmers, the announced minimum support price (MSP) for wheat has often been inadequate to cover costs of cultivation for several regions and classes of farmers, especially if comprehensive costs (or Cost C2) are taken as the base. 
• Over the last two years, costs of production have risen sharply, one important component being the spiralling price of fuel.

Conclusion

India’s flip-flop on the export of wheat is an example of the Government lacking a coherent policy of food security.

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