The government said it would still allow exports backed by already issued letters of credit and to countries that request supplies “to meet their food security needs.”

The move to ban overseas shipments was not in perpetuity and could be revised, senior government officials told a press conference.

Global buyers were banking on supplies from the world’s second-biggest wheat producer after exports from the Black Sea region plunged following Russia’s Feb. 24 invasion of Ukraine. Before the ban, India had aimed to ship a record 10 million tonnes this year.

The officials added that there was no dramatic fall in wheat output this year, but unregulated exports had led to a rise in local prices.

“We don’t want wheat trade to happen in an unregulated manner or hoarding to happen,” commerce secretary BVR Subrahmanyam told reporters in New Delhi.

Although not one of the world’s top wheat exporters, India’s ban could drive global prices to new peaks given already tight supply, hitting poor consumers in Asia and Africa particularly hard.

“The ban is shocking,” a Mumbai-based dealer with a global trading firm said. “We were expecting curbs on exports after two to three months, but it seems like the inflation numbers changed the government’s mind.”

Rising food and energy prices pushed India’s annual retail inflation near an eight-year high in April, strengthening expectations that the central bank would raise interest rates more aggressively.

Wheat prices in India have risen to record highs, in some spot markets hitting 25,000 rupees (C$417) per tonne, well above the government’s minimum support price of 20,150 rupees.

Rising fuel, labour, transportation and packaging costs are also boosting the price of wheat flour in India.

“It was not wheat alone. The rise in overall prices raised concerns about inflation and that’s why the government had to ban wheat exports,” said another senior government official who asked not to be named as discussions about export curbs were private. “For us, it’s abundance of caution.”

Smaller crop

India this week outlined its record export target for the fiscal year that started on April 1, saying it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost shipments.

In February, the government forecast production of 111.32 million tonnes, the sixth straight record crop, but it cut the forecast to 105 million tonnes in May.

A spike in temperatures in mid-March means the crop could instead be around 100 million tonnes or even lower, said a New Delhi-based dealer with a global trading firm.

“The government’s procurement has fallen more than 50%. Spot markets are getting far lower supplies than last year. All these things are indicating lower crop,” the dealer said.

Cashing in on a rally in global wheat prices after Russia invaded Ukraine, India exported a record seven million tonnes of wheat in the fiscal year to March, up more than 250 per cent from the previous year.

“The rise in wheat price was rather moderate, and Indian prices are still substantially lower than global prices,” said Rajesh Paharia Jain, a New Delhi-based trader.

“Wheat prices in some parts of the country had jumped to the current level even last year, so the move to ban export is nothing but a knee-jerk reaction.”

Despite a drop in production and government purchases by the state-run Food Corporation of India (FCI), India could have shipped at least 10 million tonnes of wheat this fiscal year, Jain said.

The FCI has so far bought a little over 19 million tonnes of wheat from domestic farmers, against last year’s total purchases of a record 43.34 million tonnes. It buys grain from local farmers to run a food welfare programme for the poor.

Unlike previous years, farmers have preferred to sell wheat to private traders, who offered better prices than the government’s fixed rate.

In April, India exported a record 1.4 million tonnes of wheat and deals were already signed to export around 1.5 million tonnes in May.

“The Indian ban will lift global wheat prices. Right now there is no big supplier in the market,” another dealer said.

— Reporting for Reuters by Rajendra Jadhav in Mumbai and Mayank Bhardwaj in New Delhi; additional reporting by Nupur Anand.

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Tens of thousands of farmers have been camped on the outskirts of the capital New Delhi for over a month, calling for the repeal of laws introduced by the federal government, which says the legislation is aimed at modernizing the country’s antiquated agricultural sector.

Farm leaders say the laws are an attempt to erode a longstanding minimum support price for their produce and want a full repeal of the laws.

“The government has constantly said that if the unions give any other option besides repeal, then the government will consider them,” agriculture minister Narendra Singh Tomar told reporters after the eighth round of talks between the two sides.

“But despite long discussions, no options were presented today, and that’s why the discussions have ended here.”

The two sides will meet again on Jan. 15, he said.

“There was a heated discussion. We said we don’t want anything other than repeal of (the) laws,” Hannan Mollah, one of the farm leaders who met with the government, told reporters. “We won’t go to any court, this (repeal) will either be done or we’ll continue to fight.”

Mollah added that the protesters would proceed with a rally during India’s Republic Day celebration on Jan. 26 if their demands have still not been met.

The majority of India’s farmers sell their produce largely to small retailers at a much lower price than the government guaranteed price — offered to only a fraction of farmers.

They fear that with the introduction of the new laws, big retailers such as Reliance Industries will enter the market to buy their produce at a lower price, while the government may slowly dismantle the current system of procurement at the guaranteed price.

Earlier this week, Reliance asked authorities to help stop attacks on its telecommunication masts by protesting farmers, who say the conglomerate has profited from the reforms at their expense.

— Reporting for Reuters by Nigam Prusty and Devjyot Ghoshal; writing by Alasdair Pal.

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In eastern and western states, farmers blocked roads and squatted on railway tracks, delaying hordes of people getting to work, and preventing perishable produce from reaching markets.

Farmers from the northern states of Punjab and Haryana, neighbouring New Delhi, have been at the vanguard of the agitation since last month, and have set up protest camps in and around the capital.

“We will not allow the government to change the rules because they want to hurt farmers’ income by filling the pockets of big companies,” said Gurwinder Singh, a 66-year-old farmer from Punjab, a state known as the food bowl of India. The reforms enacted in September loosened rules around the sale, pricing and storage of farm produce that have protected farmers from an unfettered free market for decades.

Assured of floor prices, most currently sell the bulk of their produce at government-controlled wholesale markets, known as mandis.

The ruling Bharatiya Janata Party (BJP) has said the reforms would not hurt farmers’ incomes. More talks between the government and farmer organizations are due on Wednesday.

Home Minister Amit Shah late on Tuesday invited leaders of protesting farmers’ unions for talks.

“Most likely, the government on Wednesday will give a written proposal about the likely amendments in the laws. Once we receive the proposals, we will examine them,” farmers’ leader Hanan Molla told reporters after the meeting.

Social media has fanned sympathy for the farmers’ cause among the Indian diaspora abroad. During recent days, thousands of people have protested in support of the farmers outside the Indian embassy in central London. In Canada, rallies were reported over the past week in cities including Toronto, Calgary, Winnipeg and Charlottetown.

During the coronavirus pandemic, protest sites around New Delhi have turned into camps, with entire families cooking and sleeping in the open and Sikh religious organizations were providing them with face masks, water and food.

— Reporting by Reuters’ India bureau; writing by Rupam Jain and Mayank Bhardwaj.

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