According to a report in the Indian Business Line newspaper on August 25th, four years after implementing export restrictions, the Indian government officially lifted the ban on the export of wheat and wheat flour products on Monday. The products included flour, mrida flour, coarse wheat flour, whole wheat flour, and their derivative products. The report stated that this policy reversal was based on the recovery of India’s wheat production, which alleviated concerns regarding food security.
The Directorate General of Foreign Trade (DGFT) stated in two separate notices: “The export policy for the aforementioned products has been changed to ‘free’, effective immediately.” One of the notices concerns hard-grained wheat and wheat, while the other covers flour products such as flour, mrida flour, and coarse-grained wheat flour.
After the outbreak of the Russo-Ukrainian war, Indian wheat exports were essentially prohibited.
Both Russia and Ukraine are among the world's top grain exporters. The war between them has suddenly raised international wheat prices, making India a major alternative supplier. In just the first month after the war began, Indian grain prices increased by nearly 5%.
However, due to reduced production caused by the drought, coupled with high export profits, private Indian traders purchased large quantities of wheat at prices far higher than the government’s protected prices. This severely disrupted the government’s stockpiling plan. As of May 1, 2022, the government’s procurement volume decreased sharply by 44% compared to the same period in previous years. The rapid reduction in supply caused domestic prices to rise, with flour prices reaching their highest level since 2010.
In May 2022, India imposed restrictions on wheat exports due to concerns about insufficient domestic supplies and rising prices. Subsequently, the restrictions were expanded in August 2022 to include wheat flour and related products.
Recently, as domestic production reached record levels and there was ample wheat inventory, which helped to ease market conditions, the Indian government allowed exports of certain products in February and April this year.
"India Commercial Line Newspaper" points out that this timing has "significance for global markets," because the grain trade route in the Black Sea is now restricted, leading to a tight supply of wheat globally and driving up international prices. As the world's second-largest barley producer, India's increased supply will help ease the tense situation of short supplies in import-dependent markets across Asia, Africa, and Southwest Asia.
However, industry insiders point out that India's wheat export plans may face numerous difficulties.
It is reported that India has approved the export of 5 million tons of wheat and 1 million tons of wheat products this year. However, so far, the actual exports of wheat products have been less than 100,000 tons, and the exports of wheat have been less than 300,000 tons.
"The former chairman of the Indo-Sri Lankan Flour Millers' Association, Pramode Kumar, stated: "The ban was implemented abruptly and took four years to lift. Given that the ban has been lifted, the government should at least not prohibit flour exports anymore, as this is primarily to meet the needs of Indian overseas diaspora."
Kumar added that in recent years, some regions in West Asia have built their own flour mills. As a result, the demand for Indian wheat products overseas has been affected. It will take some time for exporters to regain their footing.
Additionally, Indian wheat does not have a price advantage in the international market. According to the Hindustan Times, it takes wheat exported from India’s major commercial port of Kandla to be sold at around 2600 rupees per 100 kilograms (approximately 182.65 yuan) for exporters to break even. Currently, the price remains around 2700 rupees per 100 kilograms (approximately 189.68 yuan). In comparison, even when considering the cost including freight and insurance, Australian and Black Sea wheat are cheaper than Indian wheat.
Although the ban has been lifted, due to the fierce competition in the international market, it may still take some time for India's export plans to be implemented.
