Exporting grains out of central pool may lead to broken pledges

The move may violate 2013, 2015 vows and can risk drawdown in wheat inventory

The government’s offer to supply grains to the world, apparently from its stocks, if the World Trade Organization relaxes rules, could violate its commitments made in 2013 and 2015, and risk a drawdown in its wheat inventories if state procurement falters in the coming months due to high market rates, said trade experts and market watchers.

Trade sources said wheat production in 2022-23 (FY23) could be lower than the estimated over 111 million tonnes (mt) due to a sudden and sharp rise in temperatures in some parts of North India.

India has seldom exported grains from its central pool stocks, except for humanitarian needs.

Moreover, exporting wheat and rice from state inventories could mean incurring additional expenses, given the economy cost of grains (that includes purchase and storage expenses) is significantly higher than the prevailing global rate, particularly in the case of rice.

After the recent spike in global rates, following the Russia-Ukraine offensive, the average free-on-board price of Indian wheat is closer to the estimated economy cost for FY23.

The US Department of Agriculture pegged 2021-22 wheat consumption in the country at 97 mt, whereas official production figures were 107 mt, consequently leaving a surplus of 10 mt.

In the case of rice, the consumption was estimated at 103 mt, while production was 118 mt, leaving a surplus of 15 mt.

According to official sources, India’s foodgrain stock in the central pool as on April 1 was punched in at 51.31 mt. Of which, wheat was 18.9 mt — the lowest since 2019. Rice stocks were established at 32.3 mt — higher than the 29.11 mt during the same period last year.

Rice stocks in both years do not include unmilled paddy lying with millers. If unmilled paddy is counted, total rice stocks as on April 1 will swell up to 66.12 mt, against 60.17 mt last year.

Grain stocks levels are much higher than required, particularly in the case of rice. As on April 1 every year, the country needs to maintain buffer and strategic reserves of 13.5 mt for rice and 7.46 mt for wheat.

“India made a solemn pledge in 2013 and in 2015 of not exporting its public grain stocks for commercial purposes. Although we breached the minimum subsidy levels after the National Food Security Act was implemented, we were saved by the peace clause, which states that no country will raise questions on public stockholding for feeding the poor unless a permanent solution is arrived at. If there is any attempt now to export grains from the central pool, India stands to lose its moral high ground,” said Biswajit Dhar, professor at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University.

Dhar said there are murmurs within major grain-producing nations that India is quietly liquidating its public grain stocks under the guise of enhanced exports.

Some trade sources said that private traders can indirectly purchase through the open-market channel and export wheat and rice because of a huge difference in rates. This is also causing disquiet among a few nations.