India: PMGKAY off the table, Govt looks at a rethink on wheat export ban

The measures, a senior official said, are being taken in a calibrated way taking into account the supply of stocks in the market and the required distribution under the National Food Security Act (NFSA).

A new factor is that the overall distribution is now set to be lower in quantity after the announcement given that additional allocation under Pradhan Mantri Garib Kalyan Yojana (PMGKAY) – launched in April 2020 to alleviate Covid distress — has now ended.

On December 23, the government announced the discontinuation of PMGKAY under which it gave 5 kg of foodgrains per month to about 81.35 crore people free of cost over and above their NFSA entitlement of 5 kg per person per month at Rs 2-3/kg. The government decided to make available the 5 kg/person/month foodgrains under NFSA free of cost for one year from January 2023.

“The thinking is that food security is key…we are very conscious of the fact that food stocks and food security should be maintained,” the official told The Indian Express. “Covid distress schemes could not have been stopped suddenly, we were sensitive to public consumption. As a result, more food stocks went in for free distribution. We are building up stocks, once it’s adequate, we will reconsider the wheat export ban,” the official said.

Wheat stocks in the central pool have been depleting on an average by 2 million tonnes every month over the last six months. As per data by Food Corporation of India (FCI), wheat stocks was at a six-year low of 19.02 million tonne as on December 1. In November, wheat stocks were recorded at 21 million tonne. The earlier lowest levels for the months of November and December were last seen six years ago in 2016, at 18.84 million tonne and 16.69 million tonne, respectively.

During October-December, a total of 8.3 million tonne of foodgrains was lifted under the PMGKAY, comprising 6.5 million tonne of rice and 1.8 million tonne of wheat. Low level of wheat stocks had made the government opt for higher allocation of rice under the PMGKAY last year.

In May 2022, amid concerns of low wheat procurement, the Centre had reduced wheat allocation to some states/UTs and an additional allocation of about 5.5 million tonnes of rice was announced. In September 2022, the government banned the export of broken non-basmati rice to increase domestic availability.

To keep rising wheat prices in check, the government is also considering open market sales. “Free market operations are also being considered to keep prices in check. Any more restrictions will depend on the agricultural cycle and seasonal output as well. We have to be calibrated in terms of approach for dealing with food security. If food grain production is good, then there is not an issue,” the official said.

The wheat crop for 2023-24 marketing season will start arriving in mandis by the end of March. Experts hope there’s no adverse weather situation like last year when there was excessive heat impacting wheat crop during March-April.

“As of now, it seems wheat output will be better than last year. For January, the buffer stocking norm is 10.8 million tonne plus 3 million tonne of strategic reserve. In December, 19 million tonne of wheat was there. With 2 million tonne depletion in stocks happening every month, at this rate, until April, it would be around 11 million tonne. This would be more than buffer stocking norm of 7.5 million tonne in April and the government can then reconsider its options for restrictions,” said Devendra Kumar Pant, Chief Economist, India Ratings.

The government banned wheat exports in May 2022 to ensure domestic supplies and allowed shipments only for meeting food security needs of developing countries cleared on a case-by-case basis.

India exported 46.56 lakh tonne of wheat worth $1.5 billion during April-October last year as against 72.45 lakh tonne worth $2.12 billion in 2021-22. As per government data dated December 23 last year, of the 25.99 lakh hectare increase in all rabi crops, for wheat, the increase has been of 9.65 lakh hectares from 302.61 to 312.26 lakh.