Informist, Tuesday, Sep 24, 2024

By J. Navya Sruthi and Pallavi Singhal

MUMBAI – Availability of wheat for retail consumers has been widely debated in India the past few months. The Wheat Summit in Mumbai last week, organised by Teflas and McDonald Pelz, saw a sharply divided group of participants, some favouring imports to alleviate possible shortage of the cereal, and others denying it altogether.

Many market participants said wheat prices may go as high as 3,000 rupees per 100 kg owing to lower domestic stocks, firm demand during the festival season, and uncertainty about the government's weekly open market sales. As of today, wheat prices in the benchmark market of Kota in Rajasthan were steady at 2,650-2,675 rupees per 100 kg.

"I don't understand why imports are not happening," former Union agriculture secretary Siraj Hussain said. "I have myself written to the government several times. The prices of other commodities are rising in sympathy of higher prices here... Food inflation is being passed on from one commodity to another." According to the former bureaucrat, the rising prices of wheat will have an impact on the prices of maize, rice, and other commodities.

Somnath Chatterjee, vice-president and head of procurement and logistics at ITC Ltd, said the government's weekly electronic auctions and grain imports are crucial to bring wheat prices down. Importing 3-4 mln tn of wheat will stabilise domestic prices and indicate the government's resolve to bring prices down, he said. This will also send a signal to traders and stockists who are holding on to stocks.

Under the open market sales scheme, the government fixes the price of rice and wheat and sells the grains to bulk buyers such as states and private millers through electronic auctions. The government's weekly electronic auctions of rice and wheat are meant to cool retail prices across the country.

The government usually starts open market sales of wheat in August, but this year it has not yet announced a commencement date, mainly because of dwindling wheat stocks with the government itself, which failed to meet its procurement target of 30-32 mln tn for 2024-25 (Apr-Mar). The wheat procurement process ended on Jun 30, with the government managing to buy only 26.60 mln tn from farmers, slightly more than the 26.20 mln tn procured last year.

During 2023-24, wheat sales under the open market scheme were at an all-time high of 9.4 mln tn. Last year, the reserve price for fair and average quality wheat was 2,150 rupees per 100 kg, and 2,125 rupees for wheat of reduced specification quality.

The government's wheat stocks as of Sep 1 were 25.1 mln tn, 3.3?low the Jul-Sep buffer norm of 27.58 mln tn. Wheat stocks were also down 3.4% on year and more than 6% lower than last month's stocks, according to Food Corp of India data.

According to buffer norms, the minimum wheat stocks for Jul-Sep should be 27.58 mln tn--operational stock of 24.58 mln tn and strategic reserve of 3 mln tn. The government sets the buffer requirement of food grain for every quarter, and the FCI has to maintain the mandated level.

Hussain said the situation of shortage of wheat could easily be managed by lowering import duty. "There is a sense of panic among millers in South India," the former bureaucrat said. "I keep receiving calls from them that wheat is not available and that they are trying to get it from Uttar Pradesh. This can easily be mitigated by lowering the import duty."

CONTRARIANS

At the one-and-a-half-day conference, there were also industry officials who believe there is no dire need currently to import wheat. A country like India is always used to seeing ample foodgrain stocks, and the government is actually not worried about the availability of the grain in domestic markets, they said.

Last week, Sanjeev Chopra, food secretary, said at a press conference that there is enough supply of wheat in the country. Most industry participants also shared this view and said farmers are holding stock to sell when prices rise. They also said the government will start the weekly open market sales after December and "sell wheat aggressively", with just two months left for the harvest of the new crop.

Wheat is grown only during the rabi season and is harvested in February and March. The government starting its open market sales after December, just two months ahead of new crop arrivals, would help to curb prices, they said.

On the production front, the industry's wheat production estimates for 2023-24 were also not aligned with those of the government. The industry expects India's 2023-24 wheat production at 100-104 mln tn, while the government's third advance estimates pegged output at 112.9 mln tn, a huge difference. On the basis of the production estimates, a majority of participants at the summit saw a gap of at least 5 mln tn of wheat in the country.

IMPORT PANACEA?

While the majority believed the government's weekly sales and imports could control prices, there were exceptions who said importing wheat is the only option to curb domestic wheat prices.

Khalid Khan, vice-president of bulk commodities and supply chain at ITC Ltd's agri division, said wheat prices could touch 30 rupees per kg if open market sales of the commodity do not begin soon. He added, "Even if open market sales begin, prices are unlikely to fall below 29 rupees per kg in retail markets."

According to Khan, open market sales will not affect prices largely because the government cannot offload as much as it did during 2023-24. In one of his presentations at the conference, Khan said, of the 100 mln tn of wheat produced in 2023-24, 30 mln tn was retained by farmers, and almost 26 mln tn was procured by the government, with the remainder in the hands of private traders.

After accounting for the government's exports, wheat kept aside for the public distribution system, and for Bharat brand sales, only 5.4 mln tn would be left with the government for open market sales, according to Khan's presentation. Just 5.4 mln tn against the record sales of 9.4 mln tn last year would not help cool wheat prices, he said. End

Edited by Rajeev Pai

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