Ukraine invasion, global wheat supply and India’s opportunity

News: the Russia-Ukraine war continues to be at the centre of the world debate and recently, the Ukrainian President Volodymyr Zelenskyy has denied insisting on NATO membership which was one of the reasons for Russian invasion of Ukraine.

What are the negative effects of the Russia-Ukraine Conflict?

The energy, gas prices are surging and wheat prices are skyrocketing. For example, wheat prices in exporting countries like the US shot up to $525/tonne, Australian wheat export prices touching $395/tonne, Argentina at $425/tonne, etc.

The US and its western allies may not compromise on the matter. They can put the strictest sanctions on Russia.

Russia-China Relation: China has openly indicated that it will stand firmly with Russia, it may not be good news for either NATO or India.

 What are the opportunities for India in the wake of the crisis?

Wheat Export can reduce India’s food subsidy bill as well as compensate for the higher costs of imports of crude oil.

Structural Reforms: There are a number of issues, like state wise variation in procurement prices, for example, Punjab has 8.5% mandi fee/cess/ arhatiya commission while in most other states, it hovers around 3-4 per cent. Therefore, central government and states like UP. Punjab and Madhya Pradesh being the largest contributors to the central pool can take lead.

Way Ahead

To tap wheat window, the buffer stock of Food Corporation of India (FCI) can be used for exports of wheat.

Scaling down the target of procuring wheat in the coming marketing season: It can be done by letting the private sector buy wheat at competitive prices.

Procurement reforms: There should be symmetry in procurement costs. like the FCI can put a ceiling on procurement expenses (including arhatiya commissions/fees) to be no more than 3% of the MSP in all states.

Promotion of the private sector companies: state government can promote private players to build export lines, storage silos with grading, packaging and processing facilities.

PDS beneficiaries in wheat-growing states: they can be given an option to get grain or cash in lieu of grains.

Source: The post is based on the article “Ukraine Invasion, Global Wheat Supply and India’s opportunity” published in the Indian Express on 14the March 2022