Government not willing to subsidise wheat exports on fiscal constraints

The decision of removing ban and allowing wheat export may come to a cut short, with the inter-ministerial wrangling. The agriculture ministry is keen to get wheat shipped out, but at current international prices exports are not viable. At present, domestic prices are significantly high compared to international prices, and export of wheat is commercially possible only if the government gives subsidy to traders. However, the finance ministry is not ready to offer any subsidies on exports of wheat as it is under the pressure to meet the fiscal deficit target of the current financial year.  

The government is concerned over its possible effect on the domestic price situation and inflation scarred government already had delayed its decision on exports of wheat, in spite of record production and more than comfortable stocks. However, the empowered group of ministers on July 11 decided that the country could risk lifting the four-year-old export ban to make place for more stocks when fresh procurement begins in September. But the international prices have dropped since then, making exports unviable at current prices.

Russia reportedly sold around 1, 80,000 tonnes of wheat to Egypt at the cost of $243.50 to $244.5 every tonnes. Whereas, other producers such as, United States and European Union had offered wheat at around $285 a tonnes. On the other hand, the domestic prices of wheat are around $350 per tonnes.

Along with the high domestic prices, the stand adopted by the ministry of food, consumer affairs and public distribution against the decision of wheat exports is also increasing the difficulties of exporters’. The Minister of State for Agriculture, Consumer Affairs, Food & Public Distribution KV Thomas had said that his ministry wanted that the excess foodgrain should be distributed in the country first.

The government is distributing around 5 million tonnes of wheat to Below Poverty Line (BPL) families and 5 million tonne to Above Poverty Line (APL) families, beside this, the government is additionally distributing 5 million tonne to 150 poorest districts.  On the other hand, government stock is overflowing and lot of stock is lying in sheds in open. The situation is expected to become worse when the kharif harvest starts arriving later this year.