NEW DELHI: India may consider permitting the import of cheaper wheat from Russia to mitigate the rising domestic wheat prices ahead of the Lok Sabha election in March-April 2024. Riding the success in agrarian states during recent elections, the government might allow the import of over one million metric tonnes (mmt) of cost-effective Russian wheat by potentially reducing the current 40% import duty by approximately 15-20%.
The domestic wheat price remains 25% higher than the stipulated price, as wheat production has been adversely affected for two consecutive years due to unfavorable weather conditions, impacting the country’s buffer stock. The current rabi sowing season is lagging compared to the previous year, and the weather outlook, influenced by the El Nino phenomenon, may further impact output.
The reduction in import duty will be contingent on the final sowing acreage of wheat by the end of December, according to a reliable source close to the developments. Over the past month, wheat acreage has been lagging, with the latest sowing data showing 141.87 lakh hectare (Lha), a decrease of 7 Lha compared to last year. Major wheat-producing states like Punjab and Haryana have witnessed a reduction in wheat sowing areas.
However, the global wheat production outlook is not optimistic. According to S&P Global Commodity Insight, Australia, one of the major wheat producers, experienced a 40% reduction in production to 23-24 mmt due to El Nino. Additionally, adverse weather conditions have impacted domestic wheat production in China, the largest producer and consumer of wheat. China is expected to import 12-15 mmt next year, up from 12 mmt in 2023. The government is concerned that El Nino could lead to a decrease in winter rains, affecting Rabi crop output and potentially exacerbating the impact on India’s wheat buffer.
“Russian wheat outlook is better and cheaper compared to other countries. India may allow importing around one million tonnes of wheat from Russia to encourage domestic supply before election,” said an official. Russia has higher planted acres and higher yields estimated up to 90 mmt and cheaper prices will add pressure to global markets.
Adverse weather conditions had already impacted public procurement of wheat in the past two years. In 2021-22, 18.7 mmt was procured against the target of 44.4 mmt. Again in 2022-23, 26.2 mmt was procured against the target of 34.1 mmt. However, for public distribution and maintaining buffer, India at least requires around 20.5 million tonnes of wheat as on October 1.
“The government has to take multipronged steps to maintain a buffer by allowing cheaper import and flood more wheat through OMSS to bring prices down before the election,” says another official.
Delayed rabi sowing, weather hit domestic prices
The domestic wheat price remains 25% higher than the stipulated price, as wheat production has been adversely affected for two consecutive years due to unfavourable weather conditions, impacting the country’s buffer stock. The current rabi sowing season is lagging, and the weather outlook, influenced by El Nino, may impact output.