By IETeam In a significant development, India has agreed to export 200,000 tonnes of wheat to Nepal, responding to Kathmandu’s request to bolster its food security. This decision was formalized during the India-Nepal Inter-Governmental Committee (IGC) meeting on Trade, Transit, and Cooperation to Combat Unauthorised Trade, held in Kathmandu on January 10-11, 2025.
Background and Context
India, the world’s second-largest wheat producer, imposed a ban on wheat exports in May 2022 to safeguard domestic food security amid global supply disruptions and rising prices. Despite this embargo, India has made exceptions for neighboring countries facing food shortages, exemplifying its commitment to regional stability and cooperation.
Nepal, heavily reliant on Indian wheat to meet its domestic demand, has been grappling with supply constraints and escalating prices. The Nepal Flour Mills Association reports that the country’s 42 flour mills require between 800,000 to 900,000 tonnes of wheat annually, with an additional 1.2 million tonnes needed for the production of biscuits, noodles, and animal feed.
Details of the Agreement
The approved export will be facilitated through the National Cooperative Exports Limited (NCEL), a multi-state cooperative society in India responsible for managing such transactions. This arrangement aims to streamline the export process and ensure the timely delivery of wheat to Nepal.
However, this method has elicited concerns among Nepali traders. Radheshyam Agrawal, General Secretary of the Nepal Flour Mills Association, expressed apprehensions regarding the exclusivity of the arrangement with NCEL, citing potential challenges related to quality, pricing, and logistics. He emphasized the preference for engaging with multiple suppliers to enhance flexibility and efficiency in procurement.
Implications for India
India’s decision to permit this substantial export comes at a time when domestic wheat prices have surged to record highs, driven by supply shortages and robust demand from flour mills. As of January 6, 2025, wheat prices in India reached approximately ₹33,000 per metric tonne, significantly higher than the previous season. This escalation poses challenges for domestic consumers and has implications for retail inflation.
To mitigate domestic price pressures, the Indian government has implemented measures such as reducing storage limits for traders and millers and releasing wheat from state reserves. Despite these efforts, the decision to export a considerable quantity of wheat to Nepal underscores India’s commitment to supporting its neighbors, even amid internal supply constraints.
Strategic and Diplomatic Considerations
This move reflects India’s broader strategy of maintaining strong bilateral relations with Nepal, emphasizing cooperation in trade and food security. By accommodating Nepal’s request, India reinforces its role as a reliable partner in the region, contributing to stability and mutual economic growth.
Challenges and Future Outlook
The reliance on a single exporting entity, NCEL, has raised concerns among Nepali importers about potential bureaucratic delays and logistical hurdles. Additionally, the elevated cost of wheat, exacerbated by import duties—5% for Indian wheat and 10% for imports from other countries—poses economic challenges for Nepal. Traders have already begun sourcing wheat from alternative markets, including Australia and Ukraine, to diversify supply and manage costs.
As both nations navigate these complexities, the focus remains on ensuring food security and economic stability. The forthcoming wheat harvests and subsequent policy decisions will play a crucial role in shaping the dynamics of wheat supply and pricing in the region.
Conclusion
India’s approval of the export of 200,000 tonnes of wheat to Nepal highlights the intricate balance between domestic resource management and regional diplomatic commitments. While addressing Nepal’s immediate food security needs, both countries must continue to collaborate closely to overcome logistical challenges and ensure the efficient execution of this agreement, fostering stronger bilateral ties and regional cooperation.