Wheat prices have doubled in the international market following the outbreak of hostilities between Russia and Ukraine, two of the world’s large exporters of the cereal.
Although India is the world’s second largest producer of wheat, it is not a regular exporter of the cereal to the global market. However, the current tightness in global availability has created an unusual opportunity for India to export wheat from its domestic production.
Export of Indian wheat in 2021-22 touched a record high of 7.0 million tonnes (mt) valued at about $2.0 billion (approximately ₹15,000 crore) more than three times the quantity (2.15 mt) exported in the previous year.
There is talk that Indian wheat export may touch even 10 mt in 2022-23. All this has created a sense of euphoria within the government and in the export trade. Some observers are so gung-ho that they are emboldened to suggest India has arrived in the world wheat market with in a bang and that in future too India will continue to remain a large exporter of wheat.
While such talks create a feel-good atmosphere, it is important to realise they are divorced from ground reality. There is nothing to suggest India will continue to export large quantities of wheat in future.
Climate challenges
Many challenges confront Indian wheat export, not the least of which is global warming and climate change. Whether deliberate or out of ignorance, many experts overlook the well recognised fact that Indian wheat is at the limit of heat tolerance.
In the critical growing months of January and February and till mid-March the mean day temperature has to be crop friendly at around 20-21 degrees Celsius. Any marked rise in day temperature would hurt the crop yield.
Our experience this season should teach us some lessons. Higher day temperatures in March caused by heat wave hurt yields and resulted in lower wheat output than originally estimated by the government (111 mt, now reduced 106 mt). In reality, the crop may be closer to 100 mt.
Indeed, BusinessLine commented on the risks associated with overstating wheat crop production numbers (“Is government’s rabi crop harvest over-estimated?”, March 21 ).
So, global warming is a real threat to Indian wheat. Our research and development efforts need to double up. We need to be investing a lot more than we do currently in order to produce heat-tolerant, drought-resistant varieties of wheat in the years to come.
The second challenge is the acreage under wheat crop. At about 33 million hectares, the area under wheat cultivation is perhaps reaching a saturation point. It would be unwise to expect any significant expansion of area in the years to come. If anything, there is a case for shifting a part of the wheat area in Punjab and Haryana to other crops such as oilseeds and pulses. But implementation of crop diversification calls for enormous political will.
Procurement costs
The inefficiency associated with open-ended procurement of wheat in quantities far in excess of our normal requirement is well known. The policymakers justify it on the ground that it ensures farmers get remunerative price and do not have to resort to distress sale.
The government agencies spend enormous amounts of money in storage and finance cost. By the government’s own admitted position, storage and financing cost of wheat is ₹21 per quintal per month which works out to ₹2,520 per tonne per year. In other words, with one year of storage, the total cost of procured wheat goes up sharply and the cereal gets completely out-priced in the market.
While export earnings are always welcome, let us not get carried away by the euphoria generated by the current large-scale opportunistic export. Such opportunities come perhaps once a decade and not often.
If anything, we need to focus on ensuring a sustained growth in wheat production in order to meet the growing needs of the population. The multiple challenges of climate change, land constraints and high carrying costs are already daunting.
For wheat, a comprehensive or holistic approach with a long-term perspective is the need of the hour without which we risk becoming an importer over time.
The writer is a policy commentator and agribusiness specialist. Views expressed are personal