Informist, Thursday, Jul 4, 2024

By Sayantan Sarkar

NEW DELHI – Food Corp of India is waiting for the government's approval to start auctioning wheat and rice under the open market sales scheme for the 2024-25 (Apr-Mar) season, an official with the nodal procurement agency told Informist. "We have shared the policy for the open market sales scheme with the Department of Food and Public Distribution," the official said.

In 2023-24 (Apr-Mar), FCI had sold a record 9.41 mln tn of wheat through weekly auctions to check rise in prices. The sale of wheat by the nodal procurement body gained traction amongst millers and processors as the selling price in the auctions was lower than market rates. This helped FCI wound up its weekly auctions of wheat and rice by the end of February.

This year, the government kicked off procurement of wheat a month earlier in March to keep the purchases in line with the arrivals in mandis.

Wheat traders and millers told Informist that they were waiting for the government to start the open market sales as they were not interested in buying the grain from farmers. Today, the price of mill quality wheat in Indore was 2,640-2,650 rupees per 100 kg, unchanged from the previous day.

There was a lot of speculation in the past few weeks in the domestic wheat market about the government cutting the 40% import duty on the staple grain as sought by traders in view of the shortage of stocks. Though imports are not banned, the 40% duty is hefty enough to dissuade even powerful traders.

Industry sources and traders said there could be a shortage of wheat this year, and if the government imports the staple grain in August, it could maintain the demand-supply balance. According to the government's third advance estimate, India produced 112.9 mln tn of wheat in 2023-24 (Jul-Jun), against 110.6 mln tn produced in 2022-23. Market participants, however, are not as bullish on the production for 2023-24. They see output at 105-106 mln tn. In 2023, the country consumed a little over 104 mln tn of wheat.

Last month, Food Secretary Sanjeev Chopra had told reporters at a press conference that the government will explore all options, including a cut in import duty and starting open market sales auctions, to keep the market stable.

The government's wheat stocks with FCI were down nearly 5% on year but up 15% on month at 29.9 mln tn as of Jun 1, data from the nodal food procurement agency showed. This is the lowest wheat stock level for Jun 1 since 2008.

The buffer norm for wheat stocks for the Apr-Jun period is 7.46 mln tn--operational stock of 4.46 mln tn and strategic reserve of 3 mln tn. The government sets the buffer requirement of food grains for every quarter and FCI has to maintain the mandated level.

The mandated buffer for the Jul-Sep quarter is 27.58 mln tn--operational stock of 24.58 mln tn and strategic reserve of 3 mln tn. End

Edited by Ashish Shirke

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