India unlikely to lift ban on export of food items

By Zia Haq

India is not looking to lift its ban on export of food commodities anytime soon, especially wheat, despite official projections of record output of the grain this year, two officials said on Wednesday, citing continued risks of food inflation and a priority to cater to domestic consumption.

Extreme weather has roiled the country’s crop output in the past two years, stoking prices. The world’s second biggest wheat consumer banned exports in 2022 after a heatwave cut output. The country has also banned overseas shipments of white rice and onion to cool prices, angering farmers and exporters.

Last month, the India Meteorological Department, the national weather bureau, predicted an above-average June-September monsoon, which is expected to lead to plentiful agricultural output and drive farm growth.

Nonetheless, the government’s focus is to ramp up food reserves in state-run granaries, which hit a 16-year low earlier this month, a person aware of the development said.

“The question of lifting exports doesn’t arise now. A review of export restrictions can only be undertaken when the domestic situation is comfortable,” the person said, adding: “When there are excess stocks and there is a need to liquidate these stocks, only then we can think of reviewing the ban on wheat.”

Sufficient procurement by the government is critical this year to help India to replenish depleted stocks. The draw-down in stocks is the result of the government’s dipping into its reserves to sell a record 10 million tonnes of wheat in the open market over the past year to cool prices.

India still faces risks of food inflation and there is no proposal to review the current food trade policy, a second official said, requesting anonymity.

Food-price pressures are an obstacle in swifter fall in retail inflation to the Reserve Bank’s target of 4% , the Reserve Bank said in its monthly bulletin in March.

Despite estimates of ample wheat harvests, the country is battling high grain inflation for over a year, with cereal inflation standing in the double digits for most months in the previous fiscal. A bumper harvest should normally lead to falling prices.

India’s retail inflation eased to 4.85% from a year ago in March, a 10-month low, against 5.09% in the previous month, latest official data show. However, food inflation was still high at 8.52% in March, although it declined in comparison to 8.66% in February.

The government has so far procured nearly 20 million tonne of wheat from farmers, higher than the country’s annual requirement of 18.6 million tonne to cater to food-security schemes, official figures show. To be sure, the government will still need to purchase 6-8 million more tonne of the staple to be able to intervene in markets to keep prices stable.

The government currently has 53 million tonnes of rice (including 21 million tonnes of unmilled paddy), nearly four times the buffer requirement of 13.5 million tonnes as on April 1. Yet, prices have risen an annual 13%, dimming prospects of lifting the ban on exports.

Unlike wheat, India is a major exporter of rice. Its exports make up for more than 40% of global rice shipments. In 2021-22, the country exported nearly 22 million tonne of rice, about a sixth of its total output.

Lower food supplies prompted the country to also ban export of onions in December 2023. This came on the back of a domestic supply crunch and after a 40% export tax failed to cool prices, which had more than doubled to reach ₹100 a kilo in some cities last year.

Onion output has yet to recover to previous levels, which could stretch the export ban longer, analysts say. India is expected to harvest 19.3 million tonne of rabi or winter-grown onions during 2023-24, about 18% lower than the production of 23.6 million tonne in the previous season, according to official projections.

“At some point, India has to review at least the ban on rice because stocks are abundant. Wheat output is also good. The export bans are hurting us,” said Suraj Solanki, a trader and farmer, who is the proprietor of Sumedha Traders, Indore.

This article has been republished from The Hindustan Times.