Is the ban on wheat exports good policy?

News: Over the last month, the government has banned the export of wheat and imposed quantitative restrictions on outbound sugar shipments.

The wheat export ban came within days of a push to enhance India’s wheat supplies to the rest of the world after Russia’s invasion of Ukraine.

The government has argued that farmers have not lost out due to the ban, as most had already sold their produce this season.

The article is a discussion with experts who consider the efficacy of these curbs.

Export opportunities

Even before the Ukraine-Russia war, global food prices were increasing because of excess liquidity across the world.

The war gave India an opportunity to export more wheat. Ukraine and Russia export contributed 55 million tonnes to the global export market out of 200 million tonnes. Farmers were getting higher Open market prices (Rs. 2,400 a quintal) compared to the MSP (Rs. 2,100).

Last year, India exported 8 million tonnes out of global exports of around 64 million tonnes. Now, there is no shortage of sugar production this year. We are expecting 35 million tonnes.

Argument in favour of the government decision

The government has argued that farmers have not lost out due to the ban as most had already sold their produce this season.

Almost 30 countries have implemented the policy of export curbs per se. They have a sovereign right to do so.

The Minister of Food and Consumer Affairs has said local wheat prices have fallen by about Rs. 5 a kg.

What are the issues with the export ban?

The export ban might not help to curtail inflation and to address the upcoming issue of food security. The wheat procurement season is more or less over. This will not keep the prices down or help the government to procure and prepare better for food security.

Present trade policy for agriculture is full of ad-hocism or muddled policy-making. It has been without planning. For example, earlier, the government was exploring wheat export opportunities. Soon, it imposed an export ban.

This gives a wrong signal to domestic farmers as well as traders.

It would have impacts on farmers’ incomes as well as the long-term credibility of the export policy.

The impact on inflation may not be very high because global food prices are still high.

In the last few years, Indian farmers were receiving low prices, due to the slowdown in the economy and the pandemic. However, the export opportunities provided avenues for better incomes.

Way Forward

Instead of an outright export ban, the government could have opted for some incentive and disincentive like a minimum export price and there could have been a bonus of Rs. 250 to Rs. 300 in order to spur more procurement for food security goals.

There should be a more cohesive, consistent, stable and predictable agricultural policy not just for exports, but also for incentives and market interventions.

The policies should take care of farmers. For consumers, social protection programmes can act as a support rather than a reduction in farm prices.

There is a need for diversification. It is important for food security, and nutrition security because many of the poor are not able to buy pulses or eggs and meat in India.

In addition, farmer incomes can be increased by putting emphasis on input costs in addition to output prices. Where input prices grow faster than output prices, farmers actually make losses rather than higher incomes.

There should be focus on giving farmers the freedom to sell where and when they want. For example, to the private players.

A large country like India cannot have one system for the entire country because there are so many variations in soil, climate. etc. So, the centre should leave to the States do agricultural reform

Source: The post is based on an article “Is the ban on wheat exports good policy” published in the “The Hindu” on 10^th June 2022.