India is reportedly engaging in discussions with Russia to import wheat at a discounted rate as part of efforts to stabilize supplies and curb food inflation. This unusual move aims to counteract rising global wheat prices and ease the impact of inflation, especially in the lead-up to state and national elections next year, according to sources familiar with the matter.
The potential imports from Russia would allow India to strategically intervene in the market, thereby driving down wheat prices that have contributed to a 15-month high in inflation rates observed in July.
Sources suggest that the Indian government is considering multiple options, including private trade and government-to-government deals, for the potential wheat imports. While the decision is being approached cautiously, discussions are ongoing to determine the feasibility and implications of importing wheat from Russia.
Importing wheat through diplomatic agreements has been a rarity for India in recent years. The last substantial wheat imports occurred in 2017 when private traders brought in 5.3 million metric tons.
The plan to import Russian wheat aligns with the Indian government’s broader efforts to address supply-side issues and alleviate the pressure of rising prices on key commodities, such as fuel, cereals, and pulses. These steps are aimed at mitigating the impact of inflation on the country’s vulnerable population.
While details of the discussions remain confidential, sources indicate that the government might contemplate importing a larger quantity of wheat, potentially around 8 million to 9 million tons, to have a more substantial influence on prices. Despite the uncertain political situation, Russia’s status as one of India’s top suppliers, particularly in discounted oil purchases, strengthens the feasibility of such imports.
Officials have indicated that Russia is willing to offer discounted rates, and there are no apparent restrictions on the export of food commodities. India’s approach to importing sunflower oil from Russia and settling payments in U.S. dollars is expected to be mirrored in this case.
Experts speculate that India could potentially secure a substantial discount of $25 to $40 per ton from Russia, allowing the landed cost of wheat to remain significantly lower than local prices.
Wholesale wheat prices in India experienced a sharp increase of about 10% over two months, reaching a seven-month high in August due to limited supplies. With government warehouse stocks at 20% below the 10-year average, the urgency to address the situation has intensified.
Last year, India had halted wheat exports due to lower output, and this year’s crop is also projected to be at least 10% lower than the government’s initial estimate.
Note: The information provided here is based on available data and should not be considered as financial advice. Always refer to authoritative sources and consult with financial professionals before making investment decisions.