Challenging opportunity

War in any part of the world should be the last resort as it has serious consequences and implications on the global economy in general, and the affected countries in particular. Be it the French Revolution, American Civil War, Chinese Civil War, or the two World Wars – every war has its negative as well as positive consequences. So is the case with the ongoing Russian invasion of Ukraine.

The negative aspect of the Russia-Ukraine war is that cities have turned into debris and the livelihood of millions of Ukrainians got devastated by the conflict. Besides these, the major impact of the Russian invasion is an acute shortage of food at the global level which has led to rise in inflation.

The reason: Both the countries are global feeders as Russia is the world's largest exporter of wheat and provides more than 17 per cent of all wheat sold across national borders, while Ukraine alone produces a whopping six per cent of all food calories traded in the international market. Both the countries ferry their shipments through Black Sea Route, which has now been choked.

At a time when the people in the world are more concerned about food shortages and rising inflation, the situation that emerged after the Russian invasion is like "aapada mein avasar" (opportunity in disaster) for India, which is the second-largest producer of wheat after China. Speculating a high rise in prices, traders have started hoarding the grain even after there is an estimated shortfall of 15 per cent in wheat production due to early heatwave spells in March.

Given the global food crisis, India is ready to grab the "motherly opportunity" of becoming a world feeder as the Union Agriculture Ministry, in its 2nd Advance Estimates for 2021-22, has estimated a record 316.06 million tonnes of total foodgrain production in the country, which is higher by 5.32 million tonnes than the production of foodgrain during 2020-21. Further, the production during 2021-22 is higher by 25.35 million tonnes than the previous five years' (2016-17 to 2020-21) average production of foodgrain.

The ministry has also estimated the record production of wheat during 2021-22 at 111.32 million tonnes, which is higher by 7.44 million tonnes than the average wheat production of 103.88 million tonnes.

The Russia-Ukraine war has opened a window of export opportunities for India and the country is eyeing a record wheat export in the 2022-23 season. However, experts have suggested the government first ensure the availability of grains for domestic consumption, which includes the distribution of wheat and rice among weaker sections of the society through the Public Distribution Scheme (PDS), prior to signing export agreements with foreign countries.

Getting ready for wheat export, the Agricultural and Processed Food Products Export Development Authority (APEDA), has organised a series of meetings — virtually as well as physically — with all the stakeholders to streamline the wheat export.

APEDA Chairman M Angamuthu is actively chairing the meeting with traders, exporters, port officials, policy influencers from the Ministries of Food & Consumer Affairs, Railways, and officials from different state governments to understand their issues and make efforts in streamlining the export activities across the globe.

The government pins hope on APEDA chairman M Angamuthu, a 2002-batch Assam cadre IAS officer, as, during his chairmanship, APEDA is creating one after another milestone in the export of foodgrains.

As per the provisional figures released by the Directorate General of Commercial Intelligence and Statistics (DGCI&S), the agricultural exports have grown by 19.92 per cent during 2021-22 to touch USD 50.21 billion.The growth rate is remarkable as it is over and above the growth of 17.66 per cent at USD 41.87 billion achieved during 2020-21. It has been achieved in spite of unprecedented logistical challenges in the form of high freight rates, container shortages, etc. The historic achievement over the past two years will go a long way in realising Prime Minister Narendra Modi's vision of doubling farmers' income.

In comparison to total agricultural export, APEDA's export registered 16 per cent growth when it touched USD 25.6 billion in 2021-22 from USD 22.03 billion in 2020-21.

According to the DGCI&S data, the export of rice was the top forex earner at USD 9,654 million during 2021-22, growing nine per cent from the previous year when it touched USD 8,829 million.

The export of wheat touched an all-time high at USD 2,118 million in 2021-22, growing 273 per cent from 2020-21 when it touched USD 567 million, while other cereals registered a growth of 53 per cent by fetching USD 1,083 million in 2021-22 in comparison to the previous financial year when the figures touched USD 705 million.

When India is reporting astounding production and export figures, indicating an increase in demand for Indian foodgrains, then what's the cause of concern for experts?

They have valid reasons to defend their arguments. Talking to Millennium Post, former Agriculture Secretary Siraj Hussain said, "The major cause of concern is increased domestic procurement despite a record production of wheat and rice and proportionally less availability of foodgrains in the central pool."

"On April 1, 2022, the stock position of wheat in the Central pool was 189.9 lakh tonnes, which was 2.5 times the buffer norm of 74.6 lakh tonnes. On this date, the stock of rice, including rice from un-milled paddy, was 549.37 lakh tonnes against the buffer norm of 135.80 lakh tonnes, which is four times more than the buffer norm of rice stock," said Hussain, a senior visiting fellow at Indian Council for Research on International Economic Relations (ICRIER).

Despite a higher procurement in Rabi Market Season (RMS) 2021-22, the wheat stock in the Central pool on April 1, 2022, was 83 lakh tonnes less than last year. This is because the offtake of wheat under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) was much higher at 187 lakh tonnes in FY 2021-22 against 107 lakh tonnes in FY 2020-21.

In the last five years, India has been producing and procuring more rice and wheat each successive year. The production of wheat in FY 2020-21 was 109.59 million tonnes, out of which 433.43 lakh tonnes were procured in RMS 2021-22, while wheat procurement in previous RMS 2020-21 was 390 lakh tonnes.

In the case of rice, the production in 2020-21 is estimated at 124.4 million tonnes, out of which 60 million tonnes were procured by the government agencies. In the last five years, wheat production grew at a growth rate of about 2.5 per cent (CAGR), while its procurement grew by 14 per cent. Similarly, in the case of rice, the production grew by about 3.1 per cent and its procurement grew by about 6 per cent.

"No doubt, the Russian war on Ukraine has squeezed global wheat supplies and prices of grains have surged at an all-time high. Also, it is being assessed that due to the higher-than-normal temperature in March, there is a possibility of 10 to 15 per cent yield losses in wheat, especially if sown late, and lower yields would affect the wheat procurement for domestic consumption," Hussain stressed.

Recalling the incident of 2000, when the Indian government had encouraged unlimited exports of wheat and rice, he said, "Between 2000 and 2005, 213.6 lakh tonnes of wheat and 131.25 lakh tonnes of rice were issued from Central pool stocks (under OMSS exports) due to which wheat stock fell to about 20 lakh tonnes by April 1, 2006, against the then-buffer norm of 40 lakh tonnes and the government had to import 55 lakh tonnes of wheat from 2005 to 2007 to meet its own PDS requirement."

Agreeing with former Agriculture Secretary, Ajay Vir Jakhar, who is chairman of Bharat Krishak Samaj, said that wheat farmers are likely to witness a 15 per cent wheat yield loss because of untimely heatwaves and there would be over 9 million tonnes less procurement by government agencies. Jakhar further said that lesser procurement doesn't mean that there would be a food security problem in India.

"There is going to be a shortfall in procurement as few farmers may have retained their yield for better prices. But, more importantly due to higher prices in the international markets, traders and speculators are buying large quantities of the grains and there is nothing wrong with that," he said.

On the issue of low acreage, Panipat-based farmer Pritam Singh said, "There is loss of 15-20 per cent wheat yield in the areas of Kaithal, Karnal and bordering areas of Punjab due to water-logging following the longer rainy season. The heatwaves in March have also affected wheat yield."

However, Singh advocated for wheat export if there is record production. "The farmers should also get the benefit of rising prices of foodgrains. The wheat export would definitely help farmers in getting the better price of their agricultural produce," he said, adding that he has sold about 300 tonnes of his yield at MSP to procurement agencies.

Singh has also nullified the claims of speculators that traders are hovering around farmers to buy their yield directly from the farm. "Farmers of Haryana and Punjab have sold their wheat at government rates only. No traders have approached us for direct sale of the yield at above MSP of Rs 2,015/quintal," he said, adding that farmers are finding it tough to even match the production cost.

Contrary to Singh, farmers in Madhya Pradesh have revealed that they are not even getting the MSP of their yield and are forced to sell their wheat below MSP at Rs 1,900/quintal.

Bhagwan Meena, a farmer from the Malwa region in Madhya Pradesh, said, "There is a buzz that due to rise in prices of wheat in the international market, the prices of wheat have surged at Rs 3,000, which is not true. Farmers are not getting even the MSP in mandis and when it is procured by government agencies at MSP, the officials are retaining 50 per cent of the loan amount from the total crop value."

Indicating a "holy nexus of traders" in making huge profit at the cost of farmers, Meena, who is the founder of Kisan Swaraj Sangathan, said that it's quite obvious to understand who is getting the benefit of rising wheat prices in the international market.

The wheat export has registered a record growth of 273 per cent, but in terms of forex exchange it has brought just USD 2,118 as most of the wheat has been exported to Bangladesh and other Asian countries. The government is actively exploring export opportunities with European countries, and Egypt — one of the biggest importers of wheat — has shown its keen interest in Indian wheat.

To take it forward, an official delegation from Egypt visited India to explore the possibility of sourcing grain from India to meet the country's domestic demand.

Officials from the agriculture quarantine and pest risk analysis of Egypt, which imported 6.1 million tonnes of wheat in 2021, visited processing units, port facilities, and farms in Maharashtra, Madhya Pradesh and Punjab during their five-day visit.

Egypt, which had imported around 81 per cent of its wheat imports — estimated to be close to USD 2 billion — from Russia and Ukraine in 2021, has communicated to Indian authorities that it would like to procure a significant amount of wheat from India. India is not on the list of accredited countries which can export wheat to Egypt.

The APEDA has also communicated to India's wheat exporters to register with Egypt's public procurement agency, the General Authority of Supplies and Commodities, which manages wheat and sugar imports to the north African country.

Notably, Ukraine had produced about 80 MMT of grain, which includes wheat, corn, and barley, in 2021, and is expected to harvest less than half of that this year. A shortfall of 40 MMT would create a great gap in the supply chain and open market export for India.

As per experts, following the procurement for the Central pool, India would be able to export just 10 million tonnes of wheat, which would be not enough to balance the foodgrain gap created due to the Russia-Ukraine war.

The other major challenge for India is the closure of the Black Sea route due to the Russia-Ukraine conflict. In this scenario, India is likely to trade through the strategically important Chabahar Port in Iran to export goods to the Commonwealth of Independent States (CIS), which includes Russia, Ukraine, Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.

It is hoped that the Modi government would visualise the foodgrain shortage scenario and assess domestic consumption prior to allowing wheat export in full throttle.

Views expressed are personal