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Informist, Wednesday, May 28, 2025

 

By Afra Abubacker and J. Navya Sruthi

 

NEW DELHI/MUMBAI – In a move that marks the return of market intervention after nearly two months, the Centre has reimposed stockholding limits for wheat, capping inventories for entities in the wheat trade till Mar. 31. However, the market believes the announcement is more symbolic than substantive and is aimed at signalling the government's sensitivity to prices rather than triggering an immediate correction in wheat prices.

 

As per the official notification issued earlier Wednesday, wheat wholesalers and traders can stock only up to 3,000 tonnes, while retailers are permitted to hold 10 tonnes per outlet.

 

"This is more of a message to the market than (immediate) price control measure," said Sandeep Bansal, a miller from Uttar Pradesh. Echoing a widely shared view, Bansal said the limits are generous enough not to disrupt regular trade. "The current limit does not make any difference," he said. "The quantity is high. There is no panic in the market, maybe just a small pause in buying."

 

The market, which has been anticipating stock limits for a while, reacted mildly. Wheat prices fell INR 30-INR 40 per 100 kg following the announcement. In Indore, a key market in Madhya Pradesh, the price of the cereal slipped from INR 2,740 per 100 kg to INR 2,700, according to miller Alok Malviya. "Mandis are closed tomorrow, so the actual position will be clear only in a couple of days," he said.

 

Malviya described the stock cap as "good enough" for small and medium traders but noted that it might nudge larger players to step aside. "Small traders don't have the capacity to hold more than 3,000 tonnes anyway," he said. "But the timing is too early. There is no availability issue in the market right now. Stock limit now feels unnecessary." He added that wheat prices were bound to be higher due to the increase in minimum support price and state-level bonuses.

 

For the rabi marketing season 2025-26 (Apr-Mar), Madhya Pradesh and Rajasthan have announced a bonus of INR 175 and INR 150, respectively, over the central government's minimum support price of INR 2,425 per 100 kg. Wheat prices in Delhi are up nearly 12% on year at INR 2,770 per 100 kg. At this time last year, wheat was being sold in the national capital at INR 2,475 per 100 kg.

 

Pramod Kumar, former president of the Roller Flour Millers Federation, agreed that the market has enough breathing space under the current cap. The government has allowed processors to stock up to 70% of their capacity. "Seventy per cent of mill capacity is quite large," Kumar said. "Mills usually run at 50–60% anyway." Given that the market was anticipating a stock limit, he does not foresee any substantial dip in prices.

 

Under the latest order, traders and retailers holding stocks above the prescribed limits will need to bring inventories into compliance within 15 days and declare holdings on the Department of Food and Public Distribution portal. Notably, the compliance window is shorter than last year's 30-day period.

 

"The free period last time was 30 days, now only 15," Bansal said. "To summarise, it seems the government is (only) giving a message that they are price-sensitive." The early announcement of stock limits, usually rolled out around mid-June, reinforces this view, he said. The government may also intervene in the market with other tools like an open market sale scheme to keep prices in check, he added.

 

Still, some industry voices are questioning the rationale for the decision, especially given the official claim of a robust harvest. "It's surprising that the government came up with stock limits despite high procurement and record production this year," said Ajay Goyal, president of the Wheat Products Promotion Society.

 

So far in 2025-26, the government has procured nearly 29.7 million tonnes of wheat, about 89% of its revised target of 33.3 million tonnes. This is still a robust 12% rise from last year's procurement of 26.6 million tonnes. This has also pushed wheat stocks with the Food Corp. of India to a four-year high of 35.7 million tonnes, up 37% from a year ago.

 

"The government wants complete control in the wheat market and is cautious about inflation," said Goyal. But such interventions will drive traders out of the market, he cautioned. "Gold prices and Sensex are also hitting record highs, but the government has not interfered there," he remarked.

 

For the crop year 2024–25 (Jul–Jun), the Centre has pegged wheat production at a record 115.4 million tonnes. Officials have indicated that it could rise further to 117 million tonnes. Despite this, the Centre appears to be sensitive about wheat prices.

 

Gaurav Kochar, a trader based in Madhya Pradesh, viewed the government's move as a measure of balance rather than a crackdown. "The 3,000 tonne limit is actually quite substantial," Kochar said. "It allows them enough stock to manage regular demand-supply fluctuations without hoarding. With proper planning and supply-chain management, traders can continue to operate smoothly within this limit."

 

While the restriction may tighten flexibility during periods of peak demand, Kochar believes it will help to curb hoarding and promote market stability. Ultimately, as Bansal also pointed out, the announcement of a stock limit is not meant to shake up the trade, but simply to underscore the Centre's readiness to step in as a price watchdog, a pre-emptive act.  End

 

Edited by Rajeev Pai

 

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