May 16: India banned the exports of wheat just a day after New Delhi declared a goal of setting a new record for shipment of exports.

Extreme heat in India resulted in the decline in wheat production this year and the prices have skyrpcketed. The Indian government has made it clear that the ban on export will not be applicable for LC opened before May 13. According to Reuters, exports to countries that demand food supplies to meet food security needs will not be stopped.

Importers from around the world turned to India, the world's second-largest wheat producer, after exports via the Black Sea came to a halt due to Russia's invasion of Ukraine on February 24. Prior to the ban, India had set a target of exporting 10 million tons of wheat this year.

India is one of the world's largest wheat exporters. The decision of imposing a ban on exports can push the already tight wheat prices in the international market to new heights and put the poor consumers of Asia and Africa in a difficult position.

An official of a Mumbai-based multinational trading company said, “The ban is shocking. We already expected control on exports a few months back. However, the rates of inflation must have played a vital role in changing the decision of the government.” The rising inflation in food and energy prices pushed India's annual inflation close to 8 percent in April.

Wheat prices in India have reached record highs. In some markets, it has reached IRs 25,000 (Rs 40,000) per ton. The government of India has fixed the minimum support price of wheat at IRs 20,150 per metric ton in the country. Rising prices of fuel, labor, transportation and packaging have raised the price of wheat flour in India.

 “It is not just wheat. The price of everything has raised concerns about inflation. This is the reason why the government decided to ban wheat exports. This step is a big caution for us,” said a senior government official on condition of anonymity.

Just this week, India said that it would set a record in wheat exports in the current fiscal year which started on April 1. The Indian government had planned to send delegations to Morocco, Tunisia, Indonesia and the Philippines to find ways to increase wheat exports. Last February, the government projected wheat production to exceed 110 million metric tons this year. Later in May, the projection was reduced to 105 million metric tons. According to a New Delhi-based multinational trading company, the heat wave in India in mid-March is expected to limit wheat production to just 100 million metric tons.

“The government’s procurement has dropped by more than 50 per cent. The supply in the spot market is much less as compared to last year. All of this is indicative of low yields,” said the dealer. India exported 7 million metric tons of wheat in March while taking advantage of rising global prices following the Russia-Ukraine war. This record setting export is 250 percent more than the previous year.

“The rise in wheat prices was moderate and Indian prices are still lower than the world market. In some parts of the country, the price of wheat rose to its current level last year itself, so a ban on exports is a necessary response,” Reuters quoted New Delhi-based businessman Rajesh Pahadia Jain as saying,

Jain said India can export at least 10 million tons of wheat this year, despite a drop in production and procurement by the state-owned Food Corporation of India (FCI). So far, FCI purchased just over 19 million tons of wheat from farmers, which was 43.3 million ton last year. FCI buys food from local farmers to run food welfare programmes for the poor. Unlike in previous years, farmers preferred to sell wheat to private traders this time. Farmers are attracted to them because they pay more than the price fixed by the government. India exported 1.4 million tons of wheat in April and 1.5 million tons in May. Another Indian wheat trader says, “India's ban will push up the price of wheat worldwide. There is no big supplier in the market right now.”