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The wheat processing industry is urging the government to relax restrictions on wheat flour exports, citing strong domestic production and ample stock levels.
Ajay Goyal, Chairman of the Wheat Products Promotion Society (WPPS), told CNBC-TV18 that flour exports are in demand, especially among the Indian diaspora, and the current policy needs to reflect that.
“For two years now, it’s been quite a rigid policy to not allow exports of flour, even for those who have invested in creating that market,” said Goyal. He added that the industry is hopeful that the government will eventually allow exports with some restrictions, possibly under quantitative limits.
Domestically, prices are currently stable and closely aligned with the levels at which the government procured wheat, especially in states like Madhya Pradesh and Rajasthan where bonuses were paid. Goyal said prices in Delhi are around ₹27.50 per kg, and further movement will depend on demand. “If we see strong demand in the coming months, we could see prices move up slightly above the cost of carrying,” he noted.
However, overall demand growth remains muted, with annual growth in wheat product consumption hovering around 1 to 1.5 percent. “It’s quite flat now,” said Goyal, noting that high growth periods—such as during the pandemic when biscuit and noodle consumption surged—are behind us.
Private players, too, are said to be well stocked. “Both the private trade and the government have more or less fulfilled what they intended,” Goyal said. He highlighted Uttar Pradesh as a key contributor to private supply, with low government procurement there leaving significant volumes in the open market.
While stock levels are healthy, Goyal flagged a lack of policy clarity from the government, which he said is leading to market confusion. “We’re continuously playing a game of dumb charades with the government. It’s high time the government comes out with its clear-cut intentions or policy for this year,” he said, amid speculation about potential stock limits on traders.
On the production side, this year’s wheat crop is estimated to be about 3% to 4% percent higher than last year’s, a view consistent across government and industry estimates. This uptick, along with good procurement volumes, points to a comfortable supply situation.
Government procurement is expected to wrap up at around 30 million tonnes—just short of its 31.5 million tonne target. Goyal said the initial target was ambitious and was largely met thanks to bonuses declared in Madhya Pradesh and Rajasthan, which together brought in close to 2 million tonnes above earlier estimates.
Below is the verbatim transcript of the interview.
Q: There have been various reports suggesting that government procurement, which is almost at 30 lakh tonnes now, may stop at this level. What is your own sense?
Goyal: Yes, I think the procurement activity has almost come to an end, and so have arrivals. We’re just at the threshold of 30 million tonnes, with just a small quantity remaining to reach that round number. But we are almost there.
Q: And the target of 31.5 million tonnes, do you see that being met at all? Do you see a drag? Do you see it going above that? Or do you think this is it now?
Goyal: I think this is it, more or less. The government’s target was quite ambitious, and that was primarily achieved because of the bonuses declared in Madhya Pradesh (MP). Originally, the target in MP was 6 million tonnes, but looking at the arrivals and procurement, due to the additional ₹175 bonus, the target was raised by 2 million tonnes. That’s also almost been met, we have around 7.8 million tonnes in MP. So, MP, along with the bonus, and Rajasthan as well, helped bring in nearly 2 million tonnes. So, I believe 30 million tonnes is a good procurement figure for the government.
Q: Is there more clarity on the kind of crop we are looking at? Because when you look at the USDA numbers, government numbers, and industry and trade numbers, there’s still a lot of variation.
Goyal: I think one thing common across all estimates is that this year’s crop is about 3–4% higher than last year’s. That is evident in the procurement and in early arrivals. So, I guess the number is about 4% higher than last year’s, based on various data sources.
Q: There are reports, and this is something we’re hearing from the government too, that once procurement is done and private trade has had its fill, we could see some limits coming in. Are you hearing anything of that sort? I know it’s perhaps too early or pre-emptive, but are you hearing anything?
Goyal: I think there are two or three aspects to this. Number one, the rumour mills on WhatsApp never stop working. Again, there have been highlighted reports that there could be a stock limit of 3,000 tonnes on traders. One trader even commented that there should be a permanent stock limit on traders, there’s no point in removing the limit for just a month or two. But I believe the government is quite comfortable. If anything is lacking, it’s a clear policy direction. We’re continuously playing a game of dumb charades with the government. It’s high time the government comes out with its clear-cut intentions or policy for this year, especially since it has nearly fulfilled its procurement target of 30 million tonnes. I think the only thing moving the market right now is policy whispers. Otherwise, there is sufficient wheat in the market.
Q: What about the private trade? In my conversations with you and others in the industry, it seems the private trade has also had its fill. Compared to last year, the government has sufficient holdings, and private players seem comfortable too.
Goyal: I think this year both the private trade and the government have more or less fulfilled what they intended. Uttar Pradesh (UP) has been a surprise, because there was no bonus declared there. If you look at UP’s procurement into the government kitty, it’s around 1 million tonnes, which is low, considering it’s the largest producer. So, the stock remains in UP, and that could fulfill market needs in the coming months. Plus, there’s hope that the government may release its excess stock at some point. So overall, it’s a comfortable situation.
Q: What is your sense about wheat product exports? The government had said it would start reviewing them.
Goyal: I think the government wants to avoid triggering any price rise, and wheat product exports could become a trigger. But the industry is definitely clamouring for flour exports. As we all know, flour is a uniquely Indian product used by the Indian diaspora, and the government needs to consider this. A lot of money and effort have gone into creating the marketing network, distribution, logistics, and the entire supply chain. For two years now, it’s been quite a rigid policy to not allow exports of flour, even for those who have invested in creating that market. So, we’re still hopeful that the government will, at some point and with some restrictions, open up wheat flour exports under quantitative limits.
Q: What is your sense on prices from here on, in light of the good production, ample inventories with the government and private trade, where does that leave prices?
Goyal: Currently, if you consider the bonuses paid by the government in MP and Rajasthan, prices are aligned with those levels. In Delhi, it’s about ₹27.50, which seems appropriate given the government’s bonus in MP and Rajasthan. Prices are around the same level at which the government procured. From here, demand will determine the price movement. If we see strong demand in the coming months, we could see prices move up slightly above the cost of carrying.
Q: What is your sense of demand going forward? We have good stocks, a great crop, and with a promising monsoon, the next season also looks positive. But what about demand?
Goyal: As far as demand is concerned, large users are well covered. Most have taken a 40 to 60% hedge in terms of physical stocking, especially the large pan-India players. But demand is expected to pick up in the coming few months. With the early monsoon, we should definitely see a spurt in demand in the next 15–20 days.
Q: What is the average increase in demand growth that we’ve seen collectively for wheat products in India?
Goyal: About 1.5%, I would say.
Q: Has that been consistent over the past decade, or has there been any shift?
Goyal: It’s quite flat now, but during the coronavirus times, noodle sales went up. The biscuit industry also had a good run, with demand growing at almost 7–8% per annum, but that was five to seven years ago. There are new segments with high demand, but overall, total demand growth is around 1 to 1.5% per annum.
Q: What has the production increase been?
Goyal: Production has kept pace. This year, we’ve caught up well with whatever additional demand there has been. So, I guess this year we’ll be slightly surplus. Even last year was a surplus year as far as government stocks are concerned, although the price levels were a bit high.
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