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Informist, Tuesday, Dec. 3, 2024

 

By Afra Abubacker and J. Navya Sruthi

 

NEW DELHI/MUMBAI – With the Food Corp. of India's weekly sales of wheat set to start Wednesday, market participants are excited. They, however, find the allocated quantity inadequate amid firm demand and prices. They also expect prices to move up despite the e-auctions.

 

On Wednesday, FCI will offer 100,000 tonnes of wheat at its first e-auction under the open market sales scheme in 2024-25 (Apr-Mar), an FCI official said. The highest quantities, 14,000 tonnes and 12,500 tonnes, have been offered to Uttar Pradesh and Punjab, respectively, the official added.

 

Though the FCI is entering the wheat market following a four-month delay, millers are excited about the e-auctions. "Participation would be good. Punjab is mostly dry. There is no wheat in the state," Dinam Sood, general secretary of the Roller Flour Millers' Association of Punjab, told Informist.

 

Asked if the quantity on offer is sufficient to meet demand, Sood described it as "minuscule" and said it would only fill the "bottom of the bottom" of millers' inventories.

 

The FCI typically begins wheat auctions in July or August. This year, owing to lower procurement and falling stocks, it delayed the sales. The agency only managed to procure 26.6 million tonnes from farmers in 2024-25, slightly more than the 26.2 million tonnes procured in 2023-24, but well below the target of 30-32 million tonnes.

 

Through weekly auctions till the end of March, the FCI will sell 2.5 million tonnes of wheat to processors and millers. However, millers across major wheat-processing states say the quantity is not enough to meet the demand. Last year, FCI sold a record 9.4 million tonnes of wheat under the open market scheme.

 

Karnataka needs 200,000 tonnes of wheat a month, but the government has allocated only 5,000 tonnes for Wednesday's auction, a miller from the state said on condition of anonymity. If the quantity remains unchanged every week, it would only add up to 20,000 tonnes a month, he said. The miller said each mill processes 300 tonnes per day and the government has allowed the processors to buy a maximum of 100 tonnes at the weekly auctions.

 

For the current year, the government has set the reserve price of fair and average quality wheat at INR 2,325 per 100 kg, and wheat under reduced specifications at INR 2,300 per 100 kg. Last year, prices were INR 2,150 per 100 kg and INR 2,125 per 100 kg, respectively. 

 

CRY FOR CLEAR POLICY

The commencement of open market sales in 2024-25 has been a bit like the fable of the boy who cried wolf. Since August, media reports, citing government officials, reported commencement of open market sales sooner rather than later. However, FCI is only set to begin the 2024-25 sales now, in December. Unlike in the fable, however, millers are likely to gather eagerly when the auction does begin Wednesday as wheat supply in the market is tight. 

 

"The government should give a definitive and clear direction to the market," Sood said. And if there are no open market sales, the government has to announce likewise, he added. 

 

Asked how mills in Punjab have been running so far, Sood said, "We have been relying on private traders outside the state from Haryana, Delhi, and Uttar Pradesh." However, due to increased logistical costs, Punjab's millers have not been purchasing in bulk, he added.

 

Sood explained that the FCI procurement infrastructure in Punjab is robust, and farmers sell most of their produce to the government. "So private stocks are mostly non-existent," he said.

 

Punjab, the wheat bowl of India, contributes the highest quantity of the staple grain to the Centre's stocks. In the rabi marketing season 2024-25 (Apr-Mar), FCI procured 12.5 million tonnes of wheat, against the target of 13 million tonnes, from the state. Some 600,000-700,000 tonnes were bought by private traders, Sood added.

 

FCI ended wheat procurement in Punjab in May. Typically, wheat is harvested after Baisakhi in mid-April and arrivals start tapering off in the first week of May. Punjab mills require 100,000-200,000 tn wheat a month to meet domestic demand, Sood said.

 

As per FCI data, the highest amount of wheat at Wednesday's auction, 14,000 tonnes, has been offered to Uttar Pradesh. "There are a lot of private stocks in UP (Uttar Pradesh). But they can't neglect UP, because it's a big state with huge demand," Sood said. 

 

Asked if there are new norms on who can participate in the auction, the FCI official said the norms remain unchanged from the previous rabi marketing season. "All details on state-wise (auction) quantities and terms and conditions for participation are available at FCI valuejunction," the official said. On Tuesday, a financial daily reported that the government had excluded millers with excess stocks from participating in the auction. 

The FCI has not introduced any new norm for participation in the government's weekly e-auctions, Ajay Goyal, managing director of Shivaji Roller Flour Millers Association, clarified. The agency allows only flour mills, manufacturers of wheat products, processors, and end users of wheat to participate in the e-auctions. 

 

When the government has imposed stock limits on wheat, the FCI can only allow those who comply with the stockholding norms to participate in the auctions, the official quoted earlier explained. In September, the government had tightened wheat stockholding limits for traders, wholesalers, and processors in a bid to moderate prices. 

 

Prices of mill-quality wheat in Delhi on Tuesday were up nearly 22% on year at INR 3,100 per 100 kg, according to trade sources. To cool prices, millers say the government has to reduce the 40% import duty to encourage imports and increase domestic availability of the grain.

 

The following is the state-wise allocation of wheat to be sold under the Open Market Sales Scheme on Wednesday as per FCI data: 

 

State	Wheat allocated
Uttar Pradesh	14,000
Punjab	12,500
West Bengal	7,000
Assam	6,500
Delhi	5,500
Rajasthan	5,000
Maharashtra	5,000
Karnataka	5,000
Madhya Pradesh	4,000
Total*	100,300

*The total will not add up as states with smaller quantities have been excluded from the table.

 

End

 

Edited by Rajeev Pai

 

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