India may consider allowing cheaper wheat imports from Russia in order to mitigate rising domestic wheat prices ahead of the Lok Sabha election to be held in March-April 2024.
Given the success in agrarian states during recent elections, the government may permit the import of more than 1million metric tonnes(mmt) of cost-effective Russian wheat by potentially reducing the current 40% import duty by around 15-20%.
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Wheat Status
Domestic wheat prices remain 25% higher than the stipulated price, as wheat production has been negatively impacted for two years in a row due to unfavorable weather conditions, reducing the country's buffer stock. In comparison to last year, the rabi sowing season is currently behind schedule. The El Nino-influenced weather forecast could have an additional impact on crop yield.
In the previous two years, unfavorable weather had already affected public procurement of wheat. 18.7 mmt was procured in 21-22 against the target of 44.4 mmt. Once more in 2022–2023, 26.2 mmt was acquired compared to the 34.1 mmt goal. However, as of October 1, India needs at least 20.5 million tonnes of wheat for public distribution and buffer maintenance.
"The government must take multiple steps to maintain a buffer, including allowing cheaper imports and flooding more wheat through OMSS to bring prices down before the election," another official says.
Reduction In Wheat Import Duty
A source close to the developments mentioned that the import duty reduction will be subject to the final wheat acreage being planted by the end of December. In the last month, wheat acreage has been falling; according to the most recent sowing data, 141.87 lakh hectares (Lha) were planted, which is 7 Lha less than was planted last year. The area used for wheat sowing has decreased in major wheat-producing states like Punjab and Haryana.
The Rabi crop output could be impacted by an El Nino, which could worsen the impact on India's wheat buffer and cause a decrease in winter rains, which worries the government.
The forecast for wheat production worldwide is not promising enough, though.
- Australia, a significant wheat producer, saw a 40% decrease in production to 23–24 mmt as a result of El Nino, according to S&P Global Commodity Insight.
- Furthermore, weather conditions have hampered domestic wheat production in China, the world's largest producer and consumer of wheat. China is expected to import 12-15 MMT next year, up from 12 MMT in 2023.
- Russia has more planted acreage, higher yields—up to 90 mmt—and lower prices, which will put more pressure on international markets.
Therefore, as per an official, “The outlook for Russian wheat seems better and cheaper compared to other nations. India may allow the import of around 1MMT of wheat from Russia to encourage domestic supply before the election.”
Weather and delayed rabi sowing have impacted domestic prices.
Domestic wheat prices remain 25% higher than the stipulated price, as wheat production has been impacted for two years in a row due to unfavorable weather conditions, reducing the country's buffer stock. The current rabi sowing season is lagging, and the weather forecast, which is influenced by El Nino, may have an impact on output.
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