The government said it would still allow exports backed by letters of credit already issued and to countries requesting supplies “to meet their food security needs”.
The decision to ban overseas shipments was not in perpetuity and could be reviewed, senior government officials told a news conference.
Officials added that there had not been a dramatic drop in wheat production this year, but unregulated exports had driven up local prices.
“We don’t want wheat trading to be done in an unregulated way or hoarding to happen,” BVR Commerce Secretary Subrahmanyam told reporters in New Delhi.
Although not one of the world’s leading wheat exporters, India’s ban could push global prices to new highs given the already tight supply, hitting poor consumers particularly hard. Asia and Africa.
“The ban is shocking,” said a Mumbai-based dealer with a global trading company. “We were expecting export restrictions after two to three months, but it seems the inflation figures have changed the government’s mind.”
Wheat prices in India hit record highs, reaching 25,000 rupees ($320) a tonne in some spot markets, well above the government’s minimum support price of 20,150 rupees.
Rising fuel, labor, transportation and packaging costs are also driving up the price of wheat flour in India.
“It was not the only wheat. Rising overall prices raised concerns about inflation and that is why the government had to ban wheat exports,” said another senior government official who asked not to be named as discussions of export restrictions were private. “For us, it’s the abundance of caution.”
India this week outlined its record export target for the fiscal year which began April 1, saying it would send trade delegations to countries including Morocco, Tunisia, Indonesia and the Philippines to explore ways to increase shipments.
In February, the government forecast a production of 111.32 million tonnes, the sixth record harvest in a row, but it reduced the forecast to 105 million tonnes in May.
A spike in temperature in mid-March means the harvest could instead be around 100 million tonnes or even less, said a New Delhi-based dealer with a global trading company.
“Government purchases have fallen by more than 50%. Spot markets are getting much lower supplies than last year. All of these things point to a weaker harvest,” the dealer said.
Benefiting from a rise in world wheat prices following Russia’s invasion of Ukraine, India exported a record 7 million tonnes of wheat in the fiscal year ended March, up more than 250% over the previous year.
“Wheat price rise has been rather subdued, and Indian prices are still significantly lower than world prices,” said New Delhi-based trader Rajesh Paharia Jain.
“Wheat prices in some parts of the country had spiked to current levels even last year, so the decision to ban the export is nothing more than 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 CFI has so far purchased just over 19 million tonnes of wheat from domestic farmers, up from last year’s total purchases of a record 43.34 million tonnes. He buys grain from local farmers to run a food welfare program for the poor.
Unlike in previous years, farmers preferred to sell wheat to private traders, who offered better prices than the fixed government rate.
In April, India exported a record 1.4 million tonnes of wheat and agreements have already been signed to export around 1.5 million tonnes in May.
“The Indian ban will drive up global wheat prices. Right now there is no big supplier in the market,” said another trader.