Exclusive | Commerce Department pushed to keep wheat exports open but agri ministry wanted ban

Representative Image | Wheat sacks are loaded onto a truck at the grain market in Punjab.

The Commerce Department had fought the plan to ban the export of wheat even as the Agriculture Ministry sounded the alarm on the fast-reducing estimates of wheat production due to the heatwave, officials told Moneycontrol.

They added that the Ministry of External Affairs (MEA) had supported keeping exports under bilateral arrangements since the Prime Minister and External Affairs Minister have till now been requested by leaders from many countries to help ensure their food security in the face of a global shortage of wheat.

On May 13, India banned wheat exports with immediate effect as the world's second-largest wheat producer attempted to stabilise rising domestic prices. The government also struggled with the public procurement process, which received a low response from farmers who continued to sell at much higher prices to traders.

The ban came in the backdrop of official estimates of wheat production in 2022-23 being lowered to 105 million tonnes, from the earlier 113.5 million tonnes.

The Commerce Department had also underlined a sudden about-turn in grain export-based diplomacy. The department said the ban would be detrimental to India's image and would go against efforts to corner a large chunk of the global food-grain market in the near future.

However, the Ministries of Agriculture and Consumer Affairs said that while the ban on private exports will hurt farmers’ earnings, it was necessary to stabilise prices, which, in turn, would benefit both farmers and consumers in the short- to mid-term.

To address all these concerns, the government has kept an option open to export wheat as a tool of economic diplomacy, sources said. Under the latest move, India will bilaterally permit the export of the grain to other nations on their request in order to counter the spiralling global food crisis, which has seen a drop in wheat output.

Officials have since argued that the government has decided to rationalise the global demand and ensure that all countries facing distress get an optimal amount of Indian wheat. This is not possible when traders export wheat to the highest-bidding nation.

However, sources from multiple ministries told Moneycontrol that the decision was one of last resort and taken after instructions from the Prime Minister's Office (PMO).

"The plan to pull the plug on exports was always an option from the beginning but was disliked by every ministry that was a stakeholder in the discussions. Sadly, there was no other realistic choice," a senior official with the Consumer Affairs Ministry said.

No export plan

However, the government is yet to come up with a fixed process or formula to determine how much grain each country that seeks it gets from India, officials said. "It is also not decided if the government will accommodate all the requests that have come in. As of now, the main focus is on meeting our global responsibilities and providing as many nations with required wheat as possible, if the domestic situation permits," an official said.

Just one day before the ban, the Commerce Department announced the Centre will send trade delegations to at least nine wheat-importing nations to explore the possibilities of boosting wheat exports. The list included Morocco, Tunisia, Indonesia, Philippines, Thailand, Vietnam, Turkey, Algeria, and Lebanon.

There is no clarity on whether this trip is expected to take place under the changed circumstances.

The world's largest wheat importer, Egypt, had been the first nation to secure promises of wheat from India. Back in mid-April, it had marked India as one of the origins of wheat imports, after Egyptian officials visited India to conduct agriculture quarantine and pest-risk analysis.

"This had smoothened the process of clearance for Indian wheat en route to other markets as well," an official said. He added that Jamaica has become the latest country to officially seek wheat from India.

Not more than 10 days after the Ukraine crisis started, the Centre began discussions with various countries, including Egypt, Turkey, China, Bosnia, Sudan, Nigeria and Iran on commencing wheat exports. Initial shipments have also begun to some of these nations.

Adverse reactions

The United States was one of the first nations to appreciate India for wheat exports, and the latest move has drawn its ire. The Joe Biden administration feels the export ban will make food inflation and availability significantly worse than they already are.

US Agriculture Secretary Tom Vilsack criticised the move at the ongoing G7 meeting in Germany, calling it 'an ill-advised decision' that will create additional disruption of the market and can potentially increase prices.
Meanwhile, the European Union’s trade chief Valdis Dombrovskis had called export-restrictive measures a tendency that can only actually aggravate the problem.

Back in April, Prime Minister Narendra Modi had told US President Joe Biden that India was ready to supply its food stock to the world if the World Trade Organisation (WTO) accords permission. Current global trade laws make it difficult for a country to export grains from official stocks if they have been procured from farmers at fixed prices.

Officials said India had also started mounting a campaign on this long-due issue, hoping to use the argument that the current rules were restricting it from supplying food grains globally. However, the export ban has taken the wind out of that campaign, a senior diplomatic source said.