In the last few months, a major concern in countries importing agricultural produce from India has been the reliability of India’s agricultural exports. So, the question is whether India can become a long time, trusted exporter.
Unless the productivity of crops rises up substantially and India produces stable surpluses year after year, Indian exports can be expected to be erratic as the Indian policy makers, irrespective of the government in power will continue to give higher priority to domestic food inflation.
Government bans export of wheat and wheat products
The current cycles of export restrictions began when the temperature in north India in February 2022 rose so high that yield of wheat was affected. India was expecting to export 12 million tonnes of wheat in 2022-23. But by the end of harvesting, it was realised that the size of crop may be smaller than what the government had officially estimated for 2021-22 – 107 million tonnes. The government procured only 18.79 mt. In the previous year, 2021-22 the procurement was 43.34 million tonnes.
On May 13, 2022, due to rising inflation and much lower than required procurement of wheat, the government banned its export. On August 26, 2022 even the export of wheat flour, maida, semolina and whole meal was banned even though the total export of wheat products consumed only about 2,00,000 tonnes of wheat. In the process, the government went back on its agriculture export policy, 2018 and the efforts of Indian companies in building their brand of atta and wheat products in foreign markets took a huge hit.
As the graph below shows, India’s export of wheat has been erratic and despite the advice of experts, the new government is also unlikely to lift the export ban if wheat inflation continues to be in double digits.
Source: APEDA
As of March 31, 2024, the government procurement of wheat for 2023-24 is 26.2 mt while the normal requirement /allocation for National Food Security Act (NFSA) and other welfare schemes is about 29 mt in 2019-20 (as per pre-covid allocations). This year also, the estimate of wheat procurement is likely to be missed.
Rice Exports restricted and canalised for broken and non-basmati white rice
India is a major exporter of rice and about 40% of global trade was contributed by India.
In September 2022, the Union government banned the export of broken rice. An export duty of 20% was also imposed on export of white raw rice. The minimum export price of $1200 was fixed for basmati rice on August 25, 2023. On October 26, 2023, the MEP was reduced to $950 a tonne.
There is no restriction on export of par-boiled rice as it is in OGL (Open General License).
Basmati and non-basmati rice are major items of agri-export earning as the following graph shows.
Source: APEDA
Government decides the quantity and destination of wheat and non-basmati broken and white rice exports
Export of wheat, broken rice and non-basmati raw (white) is currently permitted only on diplomatic basis and the Ministry of External Affairs (MEA) decides the quantity and the country on a case-to-case basis. For agricultural exports, the influence of Indian Missions abroad and the South Block (housing Ministry of External Affairs) is a new reality.
The MEA has allowed export of different quantities of non-basmati rice to Mauritius, Nepal, Cameroon, Cote d’Ivoire, the Republic of Guinea, Malaysia, Philippines, Seychelles, UAE, Singapore, Comoros, Madagascar, Equatorial Guinea, Egypt and Kenya.
Not only this, the export of these items is canalised through National Cooperative Export Limited (NCEL). NCEL buys rice from three cooperatives National Agricultural Cooperative Marketing Federation (NAFED), Krishak Bharati Cooperative Limited (KRIBHCO) and National Co-operative Consumers’ Federation of India Ltd (NCCF), and these three cooperatives purchase it from private traders. It is understood that NCEL and participating cooperative add their commission/ service charge of 2.5% each.
In several ways, the current system is similar to the policy regime which prevailed earlier when export of wheat and rice from central pool stocks was largely canalised through State Trading Corporation (STC), Metals and Minerals Trading Corporation of India (MMTC) and Project & Equipment Corporation (PEC) (2000 to 2004 and 2013-14 and 2014-15).
Private traders are expecting that canalisation will be lifted if monsoon is normal and rice inflation is under check. It is unlikely that NCEL will be able to compete with private exporters.
Sugar exports
No other commodity is as regulated as sugar. Right from the price of cane to be paid to farmers to the quantity and price of sugar which can be sold by sugar mills, every decision is taken by the government.
On May 24, 2022, sugar exports were moved from “free” to “restricted” category and total export was capped at 11.2 mt in 2021-22 (October-September) and 6.1 mt in 2022-23. The restriction continues and no sugar has been exported after May 2023.
In November, the global prices of sugar touched $751 per tonne. They are now down to $558 per tonnes. Clearly, managing domestic inflation of sugar takes precedence over handsome export realisation.
Onion exports
The fluidity of export policy is most glaringly reflected in case of onion. On August 19, 2023, 40% export duty was imposed and a minimum export price of $800 per metric ton was fixed until December 31, 2023.
On December 8, 2023, a complete ban was imposed till March 31, 2024. This attracted agitation by farmers in Maharashtra as the prices crashed.
On April 25, 2024, export of 2000 tonnes of white onion was allowed from Gujarat. On May 4, 2024, the export ban was completely lifted, export was opened to private trade (not canalised through NCEL) but an export duty of 40% was levied in addition to MEP of $550 per tonne.
As in the case of wheat and rice, the government has allowed export of 99,150 tonnes of onions to Bangladesh, Bhutan, Bahrain, Mauritius, Sri Lanka and UAE for diplomatic reasons.
Meat exports
Even though India is a major exporter of buffalo meat, there is opposition to the same from some quarters. An aggressive campaign to take up vaccination for foot and mouth disease in accordance with OIE (World Organisation for Animal Health) guidelines can open up new markets for export.
The controversy over halal certification may, however, prove to be an impediment to export meat in the future as importing countries and international markets may have doubts regarding the authenticity of the meat — whether it is halal or not — from India.
Notably, India has an opportunity to become a reliable exporter of agri-commodities by increasing productivity . This would be possible only when stable surpluses are produced so that domestic inflation remains in a narrow and acceptable band.
For processed food items also there is a good opportunity for India to export to Africa and Middle East. The government will do well to not impose any restrictions on raw material sourced for such exports.
Siraj Hussain is a former Union Agriculture Secretary and Kriti Khurana is a PhD student of Economics.
