Prices have risen as the government has imposed stockholding limits and sold the grain in the open market to traders amid concerns about a shortfall in domestic production.
“The possibility (of imports) is being discussed at the highest levels,” said a person aware of deliberations that are at an early stage.
All-India retail inflation in cereals and products was 16.3% in June. Wholesale cumulative inflation in FY24 till June-end was 7.6%, having spiked 10.7% in FY23. “Wheat, rice and coarse cereals have seen double-digit inflation over the past six months,” rating agency Crisil said in a report on Monday.
A combination of low production, declining stocks and rising demand has fuelled the price rise. The government pegged India’s wheat production at a record 112.7 million tonnes (mt) in 2023, but traders and millers estimate harvest at 101-103 mt due to unseasonal rains and hailstorms in February-March in the northern, central and western plains, which damaged the ripening crop.
The Foreign Agricultural Service of the US Department of Agriculture recently estimated India’s wheat production at around 108 mt.
Wheat output fell to 107.7 million tonnes in 2022, from 109.6 mt a year earlier because of a heat wave in March.
The low harvest and rising demand depleted wheat stocks, causing market prices to inch up.
The central pool held 30.1 mt of wheat as of July 1, higher than the buffer norm of 27.6 mt but less than half the 60.3 mt it did in July 2021.
The Centre’s wheat purchases under its minimum support price (MSP) programme amounted to 26.14 million tonnes, below the target of 34 mt, triggering a rally in prices during the harvest season, when they are usually low.
In June, the food ministry had to impose a stock limit on the cereal for the first time since 2008.
India, the second largest producer of wheat, is mostly self-sufficient in foodgrain, although it did import wheat in 2016-17 after back-to-back droughts reduced output.
The global geopolitical situation is also driving wheat prices. “Russia pulling out of the Black Sea grain deal has also raised inflationary risks since Russia and Ukraine are the world’s largest suppliers of wheat and sunflower oil,” Crisil said.