Rising wheat prices may force India to take this rare measure

India has engaged in talks with Russia to import wheat at discounted rates amid surging global and domestic prices.

This move aims to boost supplies and curb food inflation in the country, especially in preparation for upcoming state elections and the major general election in 2024.

Wheat prices have surged sharply in the country in the wake of lower production and higher demand.

The wholesale wheat prices in India surged around 10 per cent in a span of two months, reaching a seven-month high in August due to limited supplies.

Furthermore, government warehouse stocks of wheat were at 28.3 million tons on August 1, which is 20 per cent below the 10-year average.

Last year, India halted wheat exports due to decreased output, and this year’s crop is predicted to be at least 10 per cent lower than the government’s estimate.

The four sources revealed that discussions are underway to allow New Delhi to effectively intervene in the market and reduce wheat prices that contributed to a 15-month high in inflation in July.

The imports would be facilitated through both private trade and government-to-government agreements, cautiously decided upon by the government.

This marks a rare instance of India importing wheat through diplomatic channels, with the last substantial import occurring in 2017 when private traders brought in 5.3 million metric tons.

Importing Russian wheat is part of a broader supply-side strategy to address rising prices of essential commodities, including fuel, cereals, and pulses.

This approach is coupled with plans to extend rural programs to mitigate the impact of inflation on lower-income populations.

While sources emphasized the private nature of the discussions, and the decision may still be weeks away, insiders suggest that India might import 8 million to 9 million tons of wheat from Russia, even though the country requires only 3 million to 4 million tons to cover the shortfall.

Russia, being a major seller of goods to India, has shown willingness to offer discounts on prevailing market prices, a stance that aligns with India’s previous oil purchases from Russia.

Government officials are also considering the use of the same approach for importing sunflower oil from Russia and settling payments in US dollars.

This strategy is projected to secure a significant discount on wheat prices, potentially ranging from $25 to $40 per tonne, ensuring that the cost remains substantially lower than local prices.

Tags: India, food inflation, demand, Russia, импорт, prices, Production, wheat