27 May 2022 14:15:43 IST

A long-time ‘deskie’, Baskar has spent much of his journalism career on the editorial desk. A keen follower of economic and political matters, he likes to view economic issues from a political economy lens as he believes the economic structure of a society is deeply embedded in its political and social ethos. Apart from writing the PolitEco column for BLoC, Baskar writes book reviews and articles on politics, economics and sports for the BL web edition. Reading and watching films are his other interests, though the choice of books and films are rather eclectic.  A keen follower of sports, especially his beloved Tottenham Hotspur FC, Baskar is an avid long-distance runner.  He hopes to learn music some day!

Wheat export ban: Did the government press the panic button?  

A labourer gathers wheat grain brought after harvesting at a wholesale grain market in Amritsar | Photo Credit: PTI

This seems to be the season for export bans and curbs. First came the wheat export ban early this month. This was followed by export curbs on steel and other products. The latest was the export curbs on sugar. 

But the ban that evoked most media comment and consternation was the one on wheat exports. And the reasons are not hard to fathom. Just days before the ban was enforced, India was talking about tapping the export opportunities in the global wheat market that arose due to the Russia-Ukraine war — two of the world’s major wheat suppliers. India had even entered into contracts with Egypt, also a major importer of wheat. 

Government-to-government transactions are thankfully exempt from this ban, so Bangladesh — the largest consumer of Indian wheat — has nothing to fear. 

The G-7 nations promptly criticised India’s move, saying that it would add to the growing food crisis in the world, largely sparked by the Russia-Ukraine war. 

Curbing prospects

The government’s sudden move seems to have been prompted by inflation figures for April — where the wholesale print came in at 15.08 and the retail print at 7.79 per cent edging closer to the 8 per cent mark, which is a good two percentage points over the RBI’s 6 per cent comfort level. 

The unexpected wheat export ban was quite clearly an indication of the government panicking in the facing of galloping inflation. What made matters worse was the fears over the falling wheat output this year, thanks to the exceptionally hot early summer that affected the standing wheat crop.

With fears over falling output, depleting grain stocks, and farmers waiting to sell in the open market where prices were ruling above government procurement prices, the government feared a threat to food security. 

But were the government fears over food security overblown? Yes, is the consensus among a surprisingly wide spectrum of economists and farmer activists.        

Anil Ghanwat of the Shetkari Sangathana, called it a “tyranny” in a recent column and said that the farmers were being denied an opportunity of making windfall gains from the recent spike in global prices. Ghanwat was part of the Supreme Court-formed farm committee and the Shetkari Sangathana was one of the major farmer organisations that were resolutely in favour of the now-repealed farm reforms laws. 

Ironically one of the farm laws — the Essential Commodities (Amendment) Bill 2020 — was brought in to do away with stockholding limits on cereals, pulses, onions, oilseeds, and potatoes. This was supposed to usher in private investments and FDI into the farm sector and help farmers play a greater role in the export markets. 

Knee-jerk reaction

According to the government’s third advance estimates of crop production, wheat output for 2021-22 is at 106.41 million tonnes, which is barely 3.18 million tonnes lower than last year’s production, a less than three per cent fall. 

Also, as eminent agriculture economist Ashok Gulati (who was also part of the Supreme Court appointed panel on farm reforms) in a recent column says, wheat stocks were at 19 million tonnes, which is more than two-and-a-half times the buffer stocks norms of 7.4 million tonnes.  Did a marginal fall in output and a comfortable stockholding situation warrant an export ban? 

If the government was worried over meeting its commitments under the various food schemes — PDS, PM Garib Kalyan Anna Yojana — it could have easily substituted wheat with rice as it has already done in a few States. Also, rice stocks are overflowing at 33 million tonnes as on April 2022. 

This knee-jerk reaction has predictably led to questions over the government’s food policy. Economists and analysts have come down hard on the government’s ‘ad-hoc’ methods of managing the food stock situation. Both Ghanwat and Gulati argue that if the government wants to build up stocks to ensure food security, it should pay more as procurement prices to famers and purchase grain from them instead of imposing export bans. 

Right vs Left

One of the surprising aspects of the wheat export ban is that it has come for criticism from economists from both the ‘right’ and ‘left’ side of the political spectrum. Both sides feel that it will hurt farmers and that the ban should be revoked at the earliest. Both sides feel that the fears over food security are overblown as there are comfortable stocks available. They also feel that the government must pay higher procurement price to farmers. 

But where they crucially differ is on some of the other recommendations on the food policy front. The ‘right’ typically argues for more play for market forces in the food front, more cash transfers instead of grain supply, and also a winding up of the various free food schemes and subsidies. 

The ‘left’ is warier of the free play of market forces and is suspicious of the trader lobby. Of course, winding up food subsidies and schemes is anathema for them and they bat for further strengthening of the PDS system.   

But the export ban has hit India’s credibility as a serious player in the global agricultural market. This despite a steady rise in India’s rice and wheat exports over the years. 

But for the government, some important political calculations seem to come into play. Inflation would be a major issue in a series of important Assembly elections lined up from now to the 2024 general elections. For the time being at least, the government seems to be more keen on appeasing the vocal urban voter than farmers.