The approval given by the group of secretaries for the export of two million tonnes of wheat on private account has been completely mistimed. It has come after considerable delay, even though it has been known for months that the country's food stocks would swell to mountainous heights after the rabi harvest and that exports would be needed to bring them down to manageable levels. The timing is odd because the bulk of the fresh wheat harvest has already been marketed in the major wheat surplus states and over 98 per cent of market arrivals have been mopped up by the public grain purchasing agencies for the Central grain pool. The private trade is reckoned to have bought no more than about half-a-million tonnes of wheat altogether. Thus, the private trade, even if it intends to export wheat, will find it difficult to do so for want of adequate supplies. Though well-to-do farmers usually retain some stocks with them for sale, prices are not anticipated to rise even later in the season due to the huge wheat stock of nearly 33 million tonnes in the hands of the government.
Most importantly, the export decision has been taken at a time when the domestic and international price scenario has turned unfavourable for exports from India. While domestic wheat prices have been pushed up by hiking the minimum support price (MSP) of wheat by huge margins year after year, international prices have fallen sharply, by about 40 per cent in the past year, making Indian wheat uncompetitive in the main export markets. Wheat of Black Sea origin (Ukraine and Russia, for instance) is currently reported to be selling at around $190 a tonne in the global bazaar whereas Indian wheat will cost traders no less than $210 a tonne (MSP of Rs 10,800 a tonne plus mandi charges, taxes and handling costs). The additional cost of transporting wheat from the producing areas in the north to distant ports would render export deals unviable at less than $225 a tonne. At best, Indian traders can sell some stocks to neighbouring countries like Bangladesh where they can enjoy the freight cost advantage.
It is, therefore, clear that wheat exports are not feasible at this stage unless the government releases subsidised grains for export, as was done by the Vajpayee government in the 1990s. But such a move would not be easy to defend, for the obvious reason that the majority of domestic consumers (those outside the public distribution network) will be buying wheat at the ruling market prices. In other words, exports at lower prices would inevitably cause an uproar. However, if the government chooses not to prune stocks through sales to overseas customers, it may be incurring heavy inventory carrying costs that will ultimately be reflected in the food subsidy and fiscal deficit. Under the circumstances, increasing domestic grain utilisation through food-for-work programmes and other social welfare schemes may perhaps be a better option, at least till the time when the global wheat price scenario becomes conducive for exports. The new government that assumes office in about a week or so, will have to take a call on this, along with several other tricky issues that await its attention.
