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Informist, Friday, Aug. 29, 2025

 

By Afra Abubacker

 

MUMBAI – The government's decision to tighten wheat stock limits has left the market more frustrated than surprised. Traders and millers say wheat prices are stable and supplies are comfortable. The revisions in stock limits suggest that the government has realised they overestimated wheat production and are tightening the limit as a pre-emptive measure in view of the upcoming festival season, they added. 

 

Rather than tightening the stock limits, the government should have started open market sales of wheat, which is the better tool to ensure availability and to check any significant price increase, traders said.

 

Tuesday, the Centre cut the stock limit for wholesalers to 2,000 tonnes from 3,000 tonnes and reduced the cap for retailers to 8 tonnes per outlet from 10 tonnes. Processors can now stock only 60% of their monthly capacity instead of 70%.

 

The government said the revised limits were aimed at preventing artificial scarcity in the market. The move comes just ahead of the festival season and the new limits are applicable till Mar. 31. However, trade participants stress that wheat prices are largely steady. On Thursday, the average all-India wheat wholesale price was INR 2,819.4 per 100 kg, up 1.7% higher on year, but down 0.2% on month, according to data from the consumer affairs ministry.

 

Though wheat prices fell INR 10–20 per 100 kg in a few local markets immediately after the notification, by and large the impact has been muted in most markets. "Stock limit impacts are temporary. Once imposed, the market feels the pressure for 7-8 days and then prices recover," Sandeep Bansal, an Uttar Pradesh-based miller said.

 

In Punjab, the top wheat producing state, wheat prices did not fall after the announcement of the tighter limits. "There is ample stock in the market. Prices are already at rock bottom and quite gloomy. Maybe prices will fall slightly in coming days," Dinam Sood, a Punjab-based miller said.

 

In Uttar Pradesh, another major producer state, wheat prices have slipped about 1.0-1.2% in the past three weeks on weak demand for flour, refined flour, and bran, Bansal said. "Monsoon is placing a head weight on wheat demand. About 28% of wheat is bran, which is used as cattle feed and even that is facing low demand," he said.

 

 

ADEQUATE CAPS, TIGHT PIPELINE

 

Most traders don't see the revised cap as very restrictive. "The new cap of 2,000 tonnes is a reasonable cap for general trade, but it is not enough for train rakes. One rake carries about 2,800 tonnes, which the earlier 3,000-tonne cap could accommodate," G.K. Sood, chairman, MEIR Commodities said.

 

The new limit will likely affect traders servicing millers in states that do not produce wheat, who rely on bulk inter-state movement. Still, by and large, the stock limit is adequate for most traders, Sood said.

 

Experts also stressed the importance of pipeline stocks for smooth operations. "The trade is not hoarding. Pipeline stocks are just enough to keep supply lines going. The distribution trade needs at least 8-9 million tonnes as working stock to keep markets running across the country," Sood said.

 

According to market estimates, declared wheat stocks on the government's portal were 13.0–13.5 million tonnes in mid-July, Bansal said. However, there are also larger undisclosed stocks that remain outside the government's radar.

 

Interestingly, the stock limits have been imposed despite a year of record wheat production and robust government procurement. According to official estimates, India produced 117.5 million tonnes of wheat in 2024-25 (Jul-Jun), of which the government procured 30 million tonnes.

 

Though wheat availability is currently comfortable, traders says supply could tighten later in the year. "The government has likely cut stock limits in anticipation of tightening going ahead. In that sense, the move is wise," Sood said.

 

He added that the revision in stock limits signalled that the government might have sensed that it had overestimated wheat production at 117.5 million tonnes. Market estimates wheat output to be closer to only 110 million tonnes. In 2023-24, official estimate of wheat production was 113.3 million tonnes, while trade estimate was 100-105 million tonnes. 

 

"Wheat and flour prices are moderate year-on-year. There is no cause for concern. But going forward, the government sees stock tightening, which I agree (with)," said MEIR's Sood.

 

According to market participants, the pipeline is tight mainly because of large government wheat holdings. As of Aug. 1, the Food Corp. of India held 34.7 million tonnes of wheat, 8 million tonnes more than its stock last year. The current wheat stocks are at a four-year high for the month and well above the buffer norm of 27.58 million tonnes. 

 

"How much will they carry? Do they want to repeat the rice situation in wheat?" Pramod Kumar, former president, Roller Flour Millers' Federation, said, referring to the surplus rice stocks that piled had up after the Centre had banned rice exports in September 2022. Rice inventories in the central pool are now at a two-decade high of 38 million tonnes.

 

OPEN MARKET SALES

The market consensus is that stock limits alone cannot ensure supply of wheat in the market. Attention has now shifted to when the government will begin open market sales of wheat.

 

"Their next step could be to start OMSS (open market sales scheme), perhaps around Diwali in October or November", said MEIR's Sood. The Diwali festival will be in late October this year, but some expect open market sales of wheat to start as early as the end of September.

 

"If they wish to close (the financial year-end stock) at 20–21 million tonnes, OMSS will only start in Dec-Jan. If they are comfortable carrying less, then they could start in Oct-Nov," Bansal said.

 

Last year, the government started selling wheat in the open market in December, though such sales usually start in July or August. This had also prompted some doubt about the government estimates of wheat production for that year. On Jul. 24, Food Secretary Sanjeev Chopra had said there was no immediate need for open market sales of wheat as prices were stable.

 

Some millers caution that low prices could hurt farmer sentiment. According to market estimates, farmers have held back 30–40 million tonnes of wheat in the hope of higher prices later. MEIR's Sood expects its stocks with farmers to be only 20-25 million tonnes.

 

"If prices fall further, their sentiments will be hit and it will impact next year's production," Dinam Sood said. Still, he backed the government's intervention. "Government took the decision on stock limit in its wisdom and rightfully so. They have to brace up for geopolitical situations." End

 

With inputs from J. Navya Sruthi

Edited by Deepshikha Bhardwaj

 

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