Explained: After the export ban, why are prices of wheat falling
New Delhi, May 16: Last week, the government announced a ban on export of wheat with immediate effect. The government took the step to manage the overall food security of the country and also curb the multi-year high inflation.
Following this the prices of wheat fell and a further correction is expected in the coming days. Wheat prices were at Rs 2,075 per quintal, down by Rs 80-100 from Friday in the Kota Mandi in Rajasthan.
In the Narela market in Delhi, the price was quoted at Rs 2,200-2,220 a quintal as against 2,300-2,330 a day earlier.
The prices of wheat was on the rise since the commencement the new crop supplies. This was mainly due to more exporters buying and projection of lower production of grain.
Further there is a sudden spike in the global prices of wheat due to the disruption of supplies from Russia and Ukraine due to the war. The two countries contribute to nearly 30 per cent of the global export trade.
Pointing out that retail prices of wheat and wheat flour have risen in the past year by up to 19 per cent, Food Secretary Sudhanshu Pandey on Saturday said the government's decision to ban wheat export is expected to cool down the domestic prices in a week or so.
He said the tight global supply, including a slight fall in wheat output in India, has spiked global prices up sharply. Consequently, the domestic prices of wheat and atta (wheat flour) have also shot up in the last month.
The likely fall in wheat output in India and even in the government's procurement is unlikely to affect the public distribution system (PDS), he said and asserted, "PDS will be run smoothly."
On Friday, the Commerce Ministry imposed a ban on wheat export with immediate effect. However, it has allowed wheat shipments with valid irrevocable letters of credit (LoC) issued on or before the date of the notification.
The country has contracted for the export of 4.5 million tonnes of wheat so far this fiscal. Out of which, 1.46 million tonnes was exported in April, as per the official data.
The Food Secretary, while addressing a press conference along with his Commerce and Agriculture counterpart, said, "Global demand was rising and different countries were putting restrictions.
Sentiments were driving prices. We are quite confident, now also the sentiments will push down the prices."
These days in several areas, inflation is imported along with the global prices. And this was happening in the case of wheat also. International wheat prices have been going up. Wheat from other countries was selling as high as USD 420-480 per tonne, he said.
In this backdrop, India had to impose curbs on wheat exports to keep a check on rising domestic prices and protect the interest of consumers, he said.
The decision will definitely help in softening the prices. However, it will not be possible to predict how much prices will fall. "But the domestic prices will no doubt cool down in a week or so," he said on the sidelines of the press conference.
Sharing a presentation on the price situation, Joint Secretary in the Food Ministry Subodh Kumar said:
"There is a price rise in last one month and one year as far as wheat and atta is concerned. Prices in the south zone are higher than other zones."
The daily average retail price of wheat has increased by 19.34 per cent to Rs 29.49 per kg on May 9 compared with Rs 24.71 per kg in the year-ago period. Similarly, retail atta prices have shot up by 14.27 per cent to Rs 32.91 per kg from Rs 28.8 per kg in the comparable period, he said.
In the wholesale market too, the daily average price of wheat rose 21.55 per cent to Rs 25.82 per kg on May 9 compared with Rs 21.24 per kg in the year-ago period, while atta price rose 15.88 per cent to Rs 27.89 per kg from 24.06 per kg in the comparable period, he said.
The maximum increase in retail atta prices was 33 per cent in a year seen in the southern zone, followed by the eastern zone 12.08 per cent, the western zone 10.74 per cent and the northern zone 8.29 per cent in last one year, he added.
According to Commerce Secretary B V R Subrahmanyam, "There has been a sudden spike in wheat and atta prices in the country. The regional spike is quite dramatic and it has gone up to 36-38 per cent."
He also said that there is no dramatic fall in production and there is no need to imagine a "crisis".
"There are adequate foodgrains available both in government stock and in public and private stock. Food consumption is an inelastic item. You can never have a sudden increase or decrease in consumption," he added.
Agriculture Secretary Manoj Ahuja said, "We are quite safe in terms of quantity of availability of wheat in the county. The production figures even after a small drop in yield especially in Punjab and Haryana is 105-106 million tonnes."
India's wheat production has been revised lower to 105-106 million tonnes for the 2022-23 crop year (July-June) from an earlier estimate of 111 million tonnes, due to heatwave, especially in northwestern India.
Even the government's wheat procurement is expected to be lower at 18.5 million tonnes from the earlier estimate of 19.5 million tonnes and the initial target of 44.4 million tonnes for the current year, according to the Food Ministry.
So far, about 18 million tonne of wheat has been procured by the Food Corporation of India (FCI) and state agencies.
(With PTI inputs)