In an unusual initiative to increase supply and reduce food inflation ahead of state and national elections next year, India is in negotiations with Russia to import wheat at a discount to rising world prices, according to four sources.
The imports would make it possible for New Delhi to interfere in the market more successfully and lower wheat prices, which in July drove inflation to its highest level in 15 months.
India hasn’t entered into diplomatic agreements to import wheat in years. India last brought in a sizable shipment of wheat in 2017, when private merchants brought in 5.3 million metric tonnes.
According to two sources with knowledge of the situation, one of the supply-side policies being considered by the government to lower the prices of essential goods like fuel, cereals, and pulses as well as an expansion of rural programmes to lessen the impact of inflation on the poor is the government’s plan to import Russian wheat.
Since the conversations are confidential and the ultimate decision might not be made for weeks, the sources wished to remain anonymous. Emails and messages requesting comments from India’s finance, commerce, and government representatives went unanswered.
Sanjeev Chopra, the top official in the federal food ministry, stated last month that there was no plan to import wheat from Russia.
Even though India only requires 3 to 4 million metric tonnes of wheat to make up the gap, New Delhi may think about importing 8 to 9 million tonnes of wheat from Russia to have a far greater influence on pricing, according to a different source.
Since the conflict in Ukraine last year, Russia has overtaken China as India’s second-largest exporter of products, mostly as a result of New Delhi’s cheap oil imports.
“Russia has indicated its willingness to offer a discount on prevailing market prices. There are no restrictions on the export of food commodities from Russia,” one official said.
“India can easily secure a discount of $25 to $40 per ton from Russia. This will ensure that the landed cost of wheat remains significantly below local prices,” said a dealer based in Mumbai with a global trade house.
Due to shortages, wholesale wheat prices in India increased by almost 10% over the course of two months, reaching a seven-month high in August.
The insider said, “India is also importing sunflower oil from Russia and making payments in US dollars and is planning to follow the same procedure.”
On August 1, there were 28.3 million tonnes of wheat stored in government warehouses, 20% less than the 10-year average.
Due to poor yield the previous year, India restricted wheat exports; this year’s harvest is also anticipated to be at least 10% lower than the government’s projection.
