India’s wheat reserves, stored in government warehouses, have reached their lowest point since 2017, totaling 9.7 million metric tons at the beginning of this month, down from 11.7 million tons in March 2022. This decline is attributed to two consecutive years of low wheat crops, prompting the state to engage in record sales to bolster domestic supplies and mitigate local price increases.
Despite the dwindling supply, the government has opted not to encourage imports by maintaining the current 40% tax or directly purchasing from key suppliers like Russia. Instead, it has tapped into state reserves to sell wheat to bulk consumers such as flour millers and biscuit-makers. This strategic move aims to control domestic prices, which have remained above the state-fixed minimum buying price since the last crop harvest.
Starting in June 2023, the government initiated the sale of wheat to private players, exceeding 9 million tons by the end of last month—a record high, according to an unnamed senior government official. The move follows the 2020 initiative when India provided free wheat to millions during pandemic lockdowns to avert food shortages.
However, lower wheat output in 2022 and 2023 has impeded the anticipated recovery of inventories at state warehouses. In 2022, India imposed a ban on wheat exports due to reduced output caused by rising temperatures. Despite the export demand surge resulting from the Russia-Ukraine conflict, the ban failed to prevent price increases. Last year’s crop fell short of the government’s record estimate of 110.6 million tons.
In a further indication of reduced output, the government purchased 26.2 million tons of wheat from local farmers last year, compared to the target of 34.15 million tons. To replenish stocks, the government has the option to increase procurement from farmers or allow imports, as suggested by a trader based in New Delhi. Some states have already incentivized wheat purchases by offering bonuses, highlighting the multifaceted challenges faced by India’s wheat industry.
