Wheat : India Resumes Wheat Imports: Addressing Domestic Supply and Price Concerns
- Smriti IASxp
- Jun 9, 2024
- 4 min read
Indian Government plans to commence wheat imports after a six-year to replenish depleted reserves and control rising prices, driven by three consecutive years of poor harvests.
India is expected to remove a 40% import tax on wheat, permitting private traders to purchase from countries such as Russia, albeit in limited quantities.
India's wheat imports are expected to rise significantly in the 2024-25 marketing year despite an anticipated record wheat crop. This increase is driven by steady domestic demand, declining government-held stocks, and relatively low global prices, according to a report from the Foreign Agricultural Service (FAS) of the US Department of Agriculture.
The Global Agricultural Information Network (GAIN) report, released on March 29, projects the country's wheat production to reach 112.5 million tonnes for the next harvest, due to favourable weather conditions from planting through the reproductive growth stages. If achieved, this would surpass last year's record output of 110.5 million tonnes.
Reasons for Resuming Wheat Imports
Declining Wheat Production:
India's wheat production has fallen over the past three years due to adverse weather conditions, leading to a significant decrease in output. The government estimates this year's wheat crop to be 6.25% lower than last year's record production of 112 million metric tons.
Depletion of Wheat Reserves:
As of April 2024, wheat stocks in government warehouses have dropped to 7.5 million tons, the lowest in 16 years, owing to the government selling over 10 million tons from its reserves to control domestic prices.
Shortfall in Wheat Procurement by Government:
The government's target for wheat procurement in 2024 was 30-32 million metric tons, but it has managed to buy only 26.2 million tons so far.
Surge in Domestic Wheat Prices:
Domestic wheat prices have remained above the government's minimum support price (MSP) of 2,275 rupees per 100 kg and have been rising recently. Consequently, the government decided to remove the 40% import duty on wheat to allow private traders and flour millers to import wheat, primarily from Russia.
Possible Implications of the Decision
Domestic Market:
- Enhanced Availability and Price Stability: Abolishing import duty will likely lead to increased wheat supplies in the domestic market, potentially mitigating price hikes.
- Replenishing Strategic Reserves: Lower import costs can aid the government in replenishing depleted wheat reserves, bolstering food security by creating a buffer against unforeseen disruptions in domestic production.
Global Market:
- Potential Upward Price Pressure: While India's estimated import volume (3-5 million metric tons) is modest, it could contribute to a rise in global wheat prices due to current high prices driven by production concerns in major exporting nations like Russia.
- Limited Overall Impact: India's import requirement is unlikely to significantly influence the global market. Larger players will continue to exert a more substantial influence on global wheat price trends
Food Corporation of India (FCI)
The FCI is a statutory body established under the Food Corporations Act 1964, functioning under the Department of Food & Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution.
Key Functions of FCI:
- Procurement: FCI acts as the nodal agency for procuring wheat and paddy at the government-declared MSP to safeguard farmers' interests and incentivise agricultural production.
- Storage: The procured food grains are stored scientifically in warehouses across the country to maintain buffer stocks and ensure availability during lean periods.
- Distribution: FCI efficiently distributes food grains to state governments for further distribution through the Public Distribution System (PDS), ensuring access to essential food items at subsidised prices for vulnerable sections of society.
- Market Stabilisation: By regulating procurement and distribution, FCI helps stabilise foodgrain prices in the market, preventing undue price fluctuations.
- Monitoring: FCI closely monitors foodgrain stocks and their movement throughout the country to identify potential shortages and ensure timely corrective measures.
Wheat
Wheat is the second most important cereal crop in India after rice and the main food crop in the north and north-western parts of the country. It is a rabi crop that requires a cool growing season and bright sunshine at the time of ripening.
Two years ago, India exported 5.3 million tonnes after shipping a record 8 million tonnes in 2021-22, but the FAS pegged the country’s 2024-25 export total at 300,000 tonnes as the government prioritizes domestic food security.
Having recently surpassed China with the world’s largest population, India faces the challenge of feeding more than 1.43 billion people (about 18% of the global population). In addition to issuing export bans and emphasizing crop production increases, the government recently launched a $15 billion grain storage scheme in which it aims to increase storage capacity by 70 million tonnes over the next five years.
The nation’s total food grain production in 2023 reached 311 million tonnes, but its storage capacity is only 145 million tonnes, less than half of what is needed, according to the Food and Agriculture Organization (FAO) of the United Nations. It is estimated that India experiences annual post-harvest losses of between 10% to 15%, mostly due to inadequate storage facilities and inefficient distribution networks.
The success of the Green Revolution contributed to the growth of rabi crops, especially wheat.
- Temperature: Between 10-15°C (Sowing time) and 21-26°C (Ripening & Harvesting) with bright sunlight.
- Rainfall: Around 75-100 cm.
- Soil Type: Well-drained fertile loamy and clayey loamy (Ganga-Satluj plains and black soil region of the Deccan).
- Top 3 Wheat Producers in World (2021): China, India and Russia.
- Top 3 Wheat Producers in India (in 2021-22): Uttar Pradesh, Madhya Pradesh and Punjab.
Status of Indian Wheat Production and Export:
India is the world's second-biggest wheat producer after China, but it accounts for less than 1% of the global wheat trade, retaining much of it to provide subsidised food for the poor. Its top export markets are Bangladesh, Nepal, and Sri Lanka
Way Forward
India's decision to resume wheat imports after a six-year gap is a pragmatic move to address domestic supply and price concerns arising from declining wheat production and depleted government reserves. While the imports may have a moderate impact on global wheat prices, the primary focus for the Indian government is to ensure food security and price stability for its citizens.
Refrence: Indian Express https://indianexpress.com/article/business/commodities/india-wheat-imports-six-years-shore-reserves-9359089/
Comments