India’s wheat export ban: Goodwill backfires for Meghna Group

India’s sudden announcement of banning wheat export came as a big blow to Meghna Group of Industries (MGI), which is one of the largest importers of the staple grain in Bangladesh.

The group booked import of around three lakh tonnes of wheat from India by June, but that was done without opening any letter of credit or LC, a necessary document for imports. Now MGI has fallen into deep trouble as India banned the export of wheat through an order issued on Friday.

“First we book the goods we want to import, then we open LC. Many suppliers around the world do business with us in this way. They trust us like anything because of our goodwill,” Mostafa Kamal, chairman and managing director of MGI, told the Business Insider Bangladesh on Saturday.

Now he sees that his company’s goodwill has become a bane. He has become too concerned as there may be a shortage of wheat if India continues the ban for a prolonged time.

Kamal said if he had opened the LCs for imports, he could have got the wheat as all export deals agreed before the directive issued on May 13 could still be honoured.

With rapid urbanization and health awareness, Bangladesh's wheat consumption has been increasing faster than before. According to the US Department of Agriculture (USDA), Bangladesh’s wheat is forecast to rise 6 percent to 84 lakh tonnes this year.

Of which, nearly 88 percent of the needs are met by imports as local farmers shifted to alternative crops for more economic returns than wheat.

Before the Covid-19 struck the world in early 2020, Bangladesh used to import wheat from Ukraine, Russia, Canada, Argentina, and the US. But the coronavirus pandemic disrupted the global supply chain and the ongoing Russia-Ukraine war made things more difficult. So, Bangladesh’s importers switched to neighbouring India for souring the staple grain.

India’s wheat export to Bangladesh increased significantly - by 255 percent - in value from April’21 to March’22 (Indian fiscal year), according to India’s commerce ministry data released on Friday.

India said it exported wheat to Bangladesh worth $1.10 billion, up from just $310 million a year ago.

The volume of India’s wheat export to Bangladesh grew by 241 percent during the period. India exported 57 percent of its total wheat shipment to Bangladesh alone.