On May 4, the government lowered its wheat production estimates by 5.7% to 105 million tonnes (MT) from the projected 111.32 MT for the crop year ending June.

Decline in wheat production

• India is the second largest producer of wheat in the world, with China being the top producer and Russia the third largest — Ukraine is the world’s eighth largest producer of wheat.
• After five straight years of a bumper wheat output, India has had to revise downwards its estimated production.
• Unprecedented heatwaves across the north, west and central parts of the country, and March and April being the hottest in over 100 years, have caused substantial loss to the yield.
• Researchers attributed the lower estimates to “early summer” affecting the crop yields in States, especially Punjab, Haryana and Uttar Pradesh.

Why is there a decline in govt procurement?

• Ukrainian war: Private traders have been prompted to buy more wheat from farmers as the price of wheat at the international level has shot up due to Ukrainian war.
• Higher prices: A large quantity of wheat was being bought by traders at a higher rate than the minimum support price (MSP).
• Hoarding by farmers and traders: Also, farmers are holding on to some quantity of wheat, expecting higher prices for their produce in the near future.

How will this impact the public distribution of grain?

• Wheat procurement is undertaken by the state-owned Food Corporation of India (FCI) and other agencies at MSP to meet the requirements under the Public Distribution System (PDS).
• Other running welfare schemes is the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) introduced during the pandemic.
• The government has revised the grain allocation under PMGKAY for May to September 2022.
• According to the new guidelines, the FCI will fill the gap left by wheat with an increased allocation of rice.
• Pointing out that from next year, fortified rice will be distributed to the entire Public Distribution System (PDS).

Will domestic wheat prices be hit?

• As government wheat procurement has dipped, concerns are being raised about the stability of prices in the country.
• The availability of grain for internal consumption, many agri-experts argue should be a priority.
• The government has dismissed concerns about both prices and stocks, asserting that India is in a comfortable situation with the overall availability of grains.
• India has enough stocks to meet the minimum requirement for next one year for meeting the requirement of welfare schemes.

How is the global supply situation shaping up?

• In order to meet the gap created by reduced Russian and Ukrainian exports, importers are turning to alternative markets.
• Wheat-producing countries like India are looking to increase exports.

Will farmers benefit?

• Farmers will certainly benefit from the scenario as they are being offered a price above the MSP.
• Amid the Russia-Ukraine crisis, new markets in countries like Israel, Egypt, Tanzania and Mozambique have opened up for India.
• However, if private traders continue to buy above MSP, eventually that could stoke inflation.
• More private buying of wheat will help India expand the agri-export basket to new countries, riding the current crisis situation.
• This trade relationship will stay even when the global crisis is over, which means farmers will get about 10%-15% extra price as market prices are ruling above MSP.

What about export plans?

• After Egypt, Turkey has also given approval for the import of Indian wheat.
• India has been eyeing deals with new export markets in European Union countries too.
• Despite the crop loss and revision of the output estimate, the Centre maintained that no curbs would be placed on wheat exports and that it was facilitating traders.

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