India considers wheat imports from Russia to bring down prices

India is in talks with Russia to import wheat at a discount to surging global prices in a rare move to boost supplies and curb food inflation ahead of state and national elections next year, according to four sources.

The imports would allow New Delhi to intervene more effectively in the market to drive down wheat prices that stoked inflation to a 15-month high in July.

“The government is exploring the possibility of imports through private trade and government-to-government deals. The decision will be made cautiously,” one of the sources told Reuters, when asked about wheat imports from Russia.

India has not imported wheat through diplomatic deals in years. The last time India imported a significant amount of wheat was in 2017, when private traders shipped in 5.3 million metric tons.

The government’s plan to import Russian wheat is one of the supply-side measures being considered to bring down prices of key commodities like fuel, cereals and pulse along with an extension of rural schemes to ease the impact of inflation on the poor, two of the sources with knowledge of the matter said.

Sources did not want to be named as the discussions are private and the final decision might be weeks away. India’s finance, trade and government spokespersons did not reply to emails and messages seeking comment.

Last month, Sanjeev Chopra, the most senior civil servant at the federal food ministry, said there was no proposal to import wheat from Russia.

LOW WHEAT STOCKS

Although India needs only 3 million to 4 million metric tons of wheat to plug the shortfall, New Delhi might consider importing 8 million to 9 million tons of wheat from Russia to have a far bigger impact on prices, another source said.

Since the war in Ukraine last year, Russia has become India’s second biggest seller of goods mainly on account of discounted oil purchases by New Delhi.

“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 is also importing sunflower oil from Russia and settling payments in U.S. dollars and is planning to use the same approach, the official added.

“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.

Wholesale wheat prices in India surged around 10% over two months to a seven-month high in August on limited supplies.

Wheat stocks at government warehouses were at 28.3 million tons on Aug. 1, 20% below the 10-year average.

Last year, India banned wheat exports due to lower output, and this year’s crop is also expected to be at least 10% lower than the government’s estimate.