Ukraine crisis & opportunity for India to export wheat

The crisis in Ukraine may give India an opportunity to export more wheat, provided we ship out more, as our central pool stood at 24.2 million tonnes, twice more than the buffer and strategic needs

Despite the US and European threats and entreaties, Russia went ahead supporting the referendum, which overwhelmingly approved Crimea to become a member state of Russia. In effect, this peninsula was part of Ukraine and is now under Russian control.

 

Indian trade with Commonwealth of Independent States (CIS) has been growing in the last few years and in 2012-13, the total trade between India and Ukraine amounted to $3.18 billion. While Ukraine exports edible oils, petroleum products and fertilisers, Indian exports cover a number of products, of which pharmaceuticals supplies alone have grown, in recent years, to $154 million. After Russia, it is Ukraine, the second largest trading partner for India, in the CIS group. Indian trade with CIS amounted to $11.58 billion

 

Apart from natural gas, which Ukraine is estimated to have large reserves, it is also a serious Wheat supplier in the international market, often in competition with Indian bids.

 

In the case of wheat supplies from India, many times we have lost international contracts due to better offers from Ukraine. With the current crisis on hand, it is just possible, that Ukraine may refrain from offering its wheat. Traders in this grain have been looking at France, as a nearby alternative. It is believed that due to Crimea's move to join Russia, the spring grain to be sown this year in Crimea could be delayed, and, in any case, it is unlikely to be available for export via Ukraine. It is reported that the grain output in Crimea is 1.2% of Ukraine's overall harvest in 2013.

 

Ukraine expects to export 10 million tonnes of wheat, between July 2013 and June 2014, but, already, in January, they have been able to ship out 7 million tonnes, to avoid the crisis that was looming large at that time.

 

As of now, Indian wheat tenders, floated by both MMTC and PEC have received prices in the range of $282 as against the indicated "floor price" of $260 per tonne. A total of 150,000 tonnes are on offer, with 80,000 tonnes ex- Kakinada port (MMTC received bids at $281.05), while 70,000 tonnes ex-Kandla port (PEC received bids at $ 282.10) from some 17 bidders.

 

It would be in our national interest to probe the possibilities of "accepting" more than one or two bids, even if by negotiation, to ship out more wheat from the country, as our central pool stood at 24.2 million tonnes, twice more than the buffer and strategic needs. At all costs exports we must, and exceed the target of five million tonnes from both private and public stocks, bearing in mind that there are weather issues in the US, affecting their crop and the political crisis in Ukraine is not yet over.

 

Nature has played against India too, in the form of hailstorm in Madhya Pradesh, which is reported to have shrunk the estimated crop size by two million tonnes, according the state government. Yet, the current overflowing stocks in the FCI godowns have to be cleared soon and make way for the new arrivals, when harvests take place in the next few weeks.

 

At the moment, India is a helpless spectator in this crisis and we need to watch the situation carefully. Russia may even face the prospect of economic sanctions from the West, though, the thought of reaction from gas supplies, which account for 20% of its export revenues may result in both sides exercising great caution not to take the wrong step in this matter.

 

As is usual, India may have to tow the line of the UN resolutions, if any, on this issue!

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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