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Export-Ban Fallout

India recently imposed a ban on wheat exports to meet the demand in the domestic market. In the wake of the Russia-Ukraine War, New Delhi’s decision has prompted the wheat prices to hit record high in Europe.

Wheat prices hit USD 453 (or INR 35,272) per tonne in European markets on May 16 (2022), a new record in recent times. Incidentally, the European agricultural markets have been in turmoil since Russia launched a military operation in neighbouring Ukraine on February 24, 2022. As Ukraine is one of the world’s largest producers of wheat, the former Soviet Republic used to export 12% of the world’s total consumption before the Russian invasion. Now, Kiev is struggling to export wheat and other commodities to its neighbours due to the war.

The crisis has been exacerbated by the decision of India, the world’s second-largest wheat producer, to suspend exports in such a scenario. It may be noted that India decided in early March to seize the world wheat export market, taking advantage of the Russia-Ukraine War. In the second week of May, India announced that it would send trade delegations to nine countries to explore the possibility of exporting wheat, citing huge wheat yields. During his recent trip to Germany, Prime Minister of India Narendra Modi said that the South Asian nation could supply food grains to the rest of the world with the permission of the World Trade Organisation (WTO). Earlier in April, Commerce and Industry Minister of India Piyush Goyal had reportedly stressed: “Our farmers have ensured that not just India, but the whole world is taken care of.

At a time when the Indian farmers planned to earn extra money by exporting wheat abroad, the Modi Administration decided to impose a ban on wheat exports (on May 14). According to an order dated May 13, the Government of India said that traders could only enter into new export deals with express Government approval. It added that “still permitted are requests approved by New Delhi from other Governments reeling from record high prices to meet their food security needs“.

Commerce Secretary of India B V R Subrahmanyam defended the Indian Government’s decision, stating that prices in wheat and flour jumped 20-40% in recent weeks because of the sharp rise in global prices. As a result, some farmers started selling wheat to traders, and not to the Government. So, the Government is worried about its buffer stock of almost 20 million tonnes, depleted by the COVID-19 Pandemic, required for handouts to millions of poor families and to avert any possible famine. “We do not want wheat to go in an unregulated manner where (wheat) may either get hoarded and is not used for the purpose which we are hoping it will be used for – which is serving the food requirements of vulnerable nations and vulnerable people,” stressed Subrahmanyam.

As India’s move has created a wheat crisis in Europe, the G7 Agriculture Ministers have strongly criticised the South Asian nation for imposing a ban on wheat exports, saying that such measures “would worsen the crisis” of rising commodity prices. “If everyone starts to impose export restrictions or to close markets, that would worsen the crisis,” said German Agriculture Minister Cem Ozdemir.

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