05/20/2022, 14.44
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Ban on wheat exports also penalises Indian farmers

by Alessandra De Poli

Farmers selling abroad were benefiting from higher global prices. Critics say the government is not serving the interests of the poorest. China defends India against G7 criticism.


Milan (AsiaNews) – India's ban on wheat exports risks penalising many groups, including Indian farmers. This is the other side of the coin of the decision taken last week by Prime Minister Narendra Modi.

The Indian later tried to backtrack, saying that orders for which irrevocable letters of credit have already been issued will be met. Likewise, exports will be allowed to countries that need to “meet their food security needs” on a case-by-case basis and with the approval of Delhi.

However, economists say that the Indian government reversed course following a surge in inflation, which exceeds 8 per cent.

Local authorities note that domestic supply have never been so low in the last 15 years; so far, the government has bought only 18 million tonnes of wheat for domestic needs compared to more than 43 million in the 2021-22.

Russia and Ukraine account for about a third of global wheat exports. Since war broke out, exports from the Ukrainian port of Odesa were put on hold, with prices rising by more than 60 per cent.

India had managed to fill the gap caused by the interruption of Ukrainian exports, also thanks to an exceptional harvest. As of 31 March, over seven million tonnes worth over US$ 2 billion had been exported, up by 275 per cent over the previous year.

The export ban will now cause new wheat shortages on international markets, driving prices up further.

Not only will this put the global food supply chain at risk, as the United Nations World Food Programme notes, but it will also jeopardise the financial security of Indian farmers, who already are among the poorest groups of the population and would have benefited the most from free market policies.

In November last year, the Indian government withdrew its planned agricultural market reform saying it sought to enhance the value of the products of Indian farmers, but that's not what Modi is doing, critics warn.

Economist Ashok Gulati told The Indian Express that if the government had been really worried about inflation, it could have inserted a minimum export price or a tariff.

“Government procurement of wheat has fallen mainly because farmers are getting higher prices by selling to private traders and exporters,” he said.

“If low procurement and depleting public stocks were a concern, what stopped the government from offering a Rs 200-250 bonus over the MSP [minimum support price] (of Rs 2,015 per quintal) to farmers? If you do that even now, farmers will definitely bring more wheat to you. The ban on exports is an implicit tax on farmers.”

Every year, the Indian government sets a minimum support price for crops, which is the price at which the government decides to buy certain agricultural products if the market price is lower.

But at present, wheat prices are 10 per cent higher than the MPS; in other words, with the export ban, farmers will not be able to benefit from the favourable conditions of the free market.

It is difficult to predict how this year's harvest will go after two months of scorching heat with temperatures topping 45 Celsius.

According to experts, production estimates will necessarily have to be revised downwards with the most pessimistic expecting a 10 per cent drop.

G7 members expressed concern over the Modi government's decision and the United States urged the Indian authorities to “reconsider” its protectionist policy.

Government sources in India said that Western countries were “no different during the Covid crisis with medicines and vaccines”, a view China, the world's leading wheat producer, defended. Beijing has had similar measures for some time.

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