Cabinet tweaks policy to allow ban of wheat flour exports as global demand shoots up

(Representative Image)

With an eye on curbing fast-rising prices of wheat flour in the domestic market, and ensuring food security, the Centre has now brought in policy changes that can finally restrict the export of wheat flour, especially Atta.

The Union Cabinet on August 25 approved a proposal to amend the existing policy which exempts wheat or meslin flour from any form of export restrictions and bans, the Commerce and Industry Department said.

"Earlier, there was a policy not to prohibit or put any restrictions on the export of wheat flour. Therefore, a partial modification of the policy was required by withdrawing the exemption from ban/ restrictions on export for wheat Flour in order to ensure food security and put a check on mounting prices of wheat flour in the country," the Department said.

The existing policy has led to a significant amount of wheat flour continuing to be exported from India even after all such exports were restricted back in July. Case in point, wheat flour exports from India have registered a growth of 200 percent from April-July 2022 compared to the corresponding period in 2021.

The continuing escalation of violence between Russia and Ukraine, accounting for around one-fourth of the global wheat trade, has led to disruptions in the supply chain, and a massive shortage of grain in the global market. The ensuing price hike has forced major importing nations in West Europe, the Middle East and Africa to seek first wheat, and then wheat flour from other producers such as India.

Story till now

In May 2022, the sudden ban on wheat had been announced by the Centre in a bid to check high prices amid growing volumes of wheat being exported abroad and concerns over domestic wheat output being hit by scorching heat waves in Punjab, Haryana and Uttar Pradesh.

Officials had since then argued that the government had decided to rationalize the global demand and ensure that all countries facing distress get an optimal amount of Indian wheat. This was not possible when traders export wheat to the highest-bidding nation. However, India’s wheat reserves have fallen to a 14-year low in August.

They had also stressed that the decision would help control retail prices of wheat and wheat flour, which have risen by an average of 14-20 percent in the last year. Average wheat prices rose by 4 percent in the last one week, and are expected to climb higher due to festival season demand kicking in from September onwards.

Subsequently, it had put tough conditions on the export of wheat flour as well on July 8. While the export policy was nominally kept 'free', all exports of wheat flour were made subject to recommendations from the inter-ministerial committee on the export of wheat. This was applicable for wheat flour, refined flour, semolina, wholemeal atta, and resultant atta.

Projections remain gim

The latest move has been necessitated by a need to protect the most vulnerable strata of society from increased prices at a time when inflation in edible oils and consumer goods has already hit the populace. Domestic wheat stocks have also fallen to a 15-year low of 26.6 million tonnes (MT) In August.

The latest official estimates continue to forecast the domestic wheat stock to be around 22. 9 MT by October 1, against the buffer norm of 20.5 MT. Meanwhile, the government has also replaced 5.5 million tonnes of wheat with rice in Pradhan Mantri Garib Kalyan Yojana (PMGKY), while 6.1 million tonnes of wheat have been replaced by rice under the National Food Security Act (NFSA).

According to the United Nations Food and Agricultural Organisation, in 2019, after China (133.6 MT) and India (103.6 MT), Russia was the third-largest wheat producer globally (74.5 million tonnes) while Ukraine ranked seventh (28.4 MT). However, large domestic demand ensured that the majority of the crop in India and China is used to feed the local populace.