Impact of Banning Export of Agri Commodities on the International Market

India, one of the biggest producers of wheat and wheat flour, prohibited wheat exports last year due to a rapid and unexpected decline in output caused by a sharp increase in temperatures during the Rabi season. This move occurred despite a surge in export demand for Indian wheat, driven by already tight global supplies resulting from the Russia-Ukraine conflict.

This was not the isolated incidence of India imposing export restrictions as an effort to tame galloping domestic prices. In the middle of May last year, India imposed a ban on wheat exports. Subsequently, in July, restrictions on wheat flour exports were introduced, mandating traders to obtain permission before shipping wheat flour.

Spoilsport El Niño

As of July this year, in the wake of rising food prices, high inflation and fear of rice shortage due to El Niño disruptions as the country heads into a festive season Indian government decided to ban the export of non-basmati white rice too in order to ensure adequate domestic availability at reasonable prices. Also, Indian parboiled rice exports were levied with a 20 per cent tariff, and the minimum export price (MEP) for Basmati rice was mandated at $1,200 per tonne, aimed at preventing non-basmati rice from being exported under the classification of basmati rice. This action was in addition to the ban imposed on the export of broken rice, declared in September last year, which remains effective even to date.

Nevertheless, in response to the protest expressed by the exporter's lobby, pointing out that over 50 per cent of basmati rice is exported for less than $1,000 per tonne, basmati rice exports may get a deep dent, the government has provided substantial relief by assuring to recommend a lower minimum export price (MEP) of $850 per metric tonne.