To bolster its food security and that of neighbouring, vulnerable nations, India has banned export of wheat with immediate effect from May 13. The tough measure comes a day after data showed that retail inflation had touched an 8-year high of 7.79% in April. Food inflation alone had surged to 8.38%. And the forecast ahead is unlikely to improve. The Directorate General of Foreign Trade said in its May 13 notification that, “export of all wheat, including high-protein durum and normal soft bread varieties, have been moved from free to the prohibited category with effect from May 13.” However, shipments will still be allowed on a G2G basis that is “on basis of permission granted by Indian government to other countries to meet their food security needs and based on the request from their government”. Also, those shipments will be allowed “where irrevocable letter of credit has been issued on or before the date of this notification, subject to submission of documentary evidence as prescribed”. Why did India ban wheat export? In its notification, theDirectorate General of Foreign Trade, which comes under the Commerce Ministry, said that due to “a sudden spike in the global prices of wheat arising out of many factors”, India had to ban exports to ensure food security in the domestic market and for its neighbours as well as other vulnerable, developing nations. India currently has a wheat surplus and will maintain that even after meeting its requirement for welfare schemes, according to the government. “After meeting the requirement of welfare schemes in the year ahead, on April 1, 2023, India would have stocks of 80 LMT of wheat, well above the minimum requirement of 75 LMT,” Sudhanshu Pandey, Secretary, Department of Food and Public Distribution (DFPD), told reporters earlier this month. The wheat surplus exists despite the lower production this year due to winter rains and a heatwave during harvest season. Why are wheat prices rising in India? However, wheat procurement by the government has dropped sharply this year and could dip to a 15-year low this season. This has happened for two reasons: Due to the rise in wheat prices in the global market, farmers have been lured to export the grain for better profit. Lower production of wheat has also hurt procurement. While India is the second largest producer of wheat, it accounted for only 1% of global exports. With the protracted war in Ukraine affecting shipments from the bread basket of the world, nations turned to India to supply their requirements. This, coupled with rising fuel and fertiliser cost, pushed up domestic prices, with wheat flour or atta selling at an average price of Rs 32.91 per kilogram on May 9 according to data from the Consumer Affairs Ministry. A year before that, the all-India retail price of wheat flour, a staple in most Indian diets, was Rs 29.14 per kg. What happens after export ban? The export ban is going to hurt farmers’ incomes, as so far they were able to augment their earnings by selling in the international market, whereas the Minimum Support Price (MSP) provided by the government remained lower than the market price. The government may argue that exporters made their earnings at the opportune time. Sudhanshu Pandey, Secretary, DPFD, had noted that from June wheat would start arriving in the international market from Argentina and Australia. Until May, 40 LMT wheat had been contracted for export and about 11 LMT has been exported in April 2022, according to Pandey. However, the ban on wheat exports might create a trust deficit between farmers and markets & reforms. The decision came at time when they could offset the higher input costs by benefiting from the rising commodity prices overseas. Critics argue that restrictions on agricultural exports are an indirect tax on farmers in countries where imposed.