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Exclusive| India gears up for wheat export push, railways to run special trains

Indian Railways will make some 250 wagons available over the next fortnight to move around 700,000 tonnes on a priority basis to seaports.

March 23, 2022 / 03:38 PM IST
(Image: Shutterstock)

(Image: Shutterstock)

The Indian government has set in motion a number of measures to smoothen wheat exports to several countries in Asia and Africa to capture markets that were dependent on Russia and Ukraine. These include measures to improve the logistics of transporting wheat from the hinterland and augmenting port handling capacity.

Moneycontrol has learned that the Indian Railways will make available around 250 wagons over the next fortnight to move about 700,000 tonnes on a priority basis to ports.

This follows a meeting called by the Agricultural and Processed Food Products Export Development Authority (APEDA) with key stakeholders to draw up strategies to promote wheat exports. The railways had assured the meeting that included traders and exporters besides officials from several ministries that it would make available sufficient rakes to support wheat exports.

“Around 250 wagons or 50 food rakes have been set aside to be used for the transportation of wheat from Punjab, Uttar Pradesh, Madhya Pradesh and Haryana to Jawaharlal Nehru Port and Mumbai Port in the next couple of weeks,” one government official said.

Each rake of 40-50 wagons can move about 3,000-3,500 tonnes of grain. The ports have been directed to increase capacity at dedicated terminals and containers for wheat.

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For the moment, wheat stocks held by the Food Corporation of India will be loaded and moved by these designated rakes, another government official said. The number of dedicated rakes operated to move wheat for exports is expected to be enhanced in April.

“Indian Railways is working hand-in-hand with the ministry of agriculture and expectations are that more food rakes will be needed to transport wheat to ports over the next few weeks,” the official said.

Government sources estimate that the railways will earn about Rs 20 crore from operating these 250 foodgrain wagons at current freight rates.

The transportation of foodgrain is charged at one of the lowest rates because it is considered a social obligation. There are no plans on the anvil to charge a premium for moving the foodgrain for exports, these sources said.

Government eyeing foreign orders

India’s wheat exports are set to rise to 7 million tonnes this year, surpassing the previous record of 6.5 million tonnes in 2012-13. Exports had crossed 6.2 million tonnes by the end of February. The rise in wheat exports began long before the Ukraine crisis began, and that was an outcome of aggressive export promotion by bodies such as APEDA.

In the first 10 months of this financial year, Bangladesh has bought 60 percent of India’s wheat allowed for exports, followed by Sri Lanka (8.1 percent) and the United Arab Emirates (7.3 percent). In 2020-21, India also entered new markets such as Yemen, Afghanistan, Qatar and Indonesia.

With India set for another bumper wheat crop of 111 million tonnes this rabi season, the government is keen to access more markets and expedite the process of exporting wheat, food secretary Sudhanshu Pandey said recently. The government is looking to export about 10 million tonnes in 2022-23.

Given the disruption to global supplies from Russia and Ukraine, India sees an opportunity to export to several countries that were dependent on these two nations. Historically, India accounted for less than 1 percent of world wheat exports. This has been changing since 2020-21 when wheat exports began rising fast after remaining stagnant for three years.

The government is in talks to start exporting wheat to Egypt, China, Turkey, Sudan, Bosnia, Nigeria, Oman, South Africa and Iran. Russia and Ukraine together account for about a quarter of global wheat exports. Russia is also the third-largest producer of wheat, after China and India, while Ukraine is the seventh-largest, the United Nations Food and Agricultural Organisation has estimated.

Price spikes

While India is actively looking for new markets, Indian wheat is not competitive globally due to the government influencing the domestic prices of wheat through the minimum support price (MSP) of the grain. With the majority of wheat is used for local consumption and a sizeable chunk bought by the government, the MSP ultimately determines prices in the local market as well as for export.

For the current crop season (July 2021-June 2022), the government had last year hiked the MSP for wheat by Rs 40 to Rs 2,015 per quintal. However, wholesale market prices are ruling much higher, at about Rs 2,400-2,500 per quintal since February 8

“As a result, when talking to the government, foreign public sector buyers have asked for assurances that price fluctuations will not affect them,” an official said. This is because there is a fear that the official policy on wheat may change soon.

Currently, farmers are not willing to sell to the government as mandi prices are much higher, at about Rs 2,500, Hiren Kotak, partner at Rajkot-based Prabhudas Jamnadas & Co, a major wheat exporter, said. “The government also has a large procurement target to fulfill in a year marked by sudden twists in exports and logistics prices. If the government raises the MSP mid-season or restricts exports going forward, market prices may crash suddenly,” he underlined.
Subhayan Chakraborty has been regularly reporting on international trade, diplomacy and foreign policy, for the past 6 years. He has also extensively covered evolving industry and government issues. He was earlier with Business Standard newspaper.
Yaruqhullah Khan
first published: Mar 23, 2022 03:38 pm