By Sandip Das
The weekly e-auctions of rice and wheat by the Food Corporation of India under the open market sale scheme continue to get a lukewarm response from traders because of the limit on purchase of grain by each buyer and higher reserve prices.
The Food Corporation of India (FCI) on Wednesday received bids for 0.1 million tonne (MT) of wheat to be sold to bulk buyers, including flour millers and food companies, against 0.18 MT offered in its fourth weekly e-auction held under the scheme.
The corporation received a lukewarm response in the third e-auction for sale of 0.37 MT of rice with bidders offered to purchase only 10 tonne of grain.
Since the beginning of the month, the corporation has sold 0.48 MT of wheat and only 470 tonne of rice under the scheme.
Sources told FE that the average bid for the fair and average quality of wheat was Rs 2,163.66/quintal which was marginally above the reserve price of Rs 2,150/quital. The minimum support price (MSP) for wheat in the current season is Rs 2,125/quintal.
Average bid price for rice under open market sape scheme this week was Rs 3,100/quintal which was on a par with the reserve price.
“In the current tranche of e-auctions, the reduction in retail price of wheat is being targeted by offering up to 100 tonne per buyer,” according to an official statement.
However, an official with a leading private company dealing with wheat products said that the limit of 100 tonne per buyer per region is a small quantity for those who want to go for bulk purchase.
In the case of rice, several traders FE spoke to said that the benchmark price of Rs 3100/quintal for e-auction fixed by the FCI is higher than similar variety of grain available in the market.
Meanwhile, the FCI has increased the maximum quantity that a buyer can bid per region to 1,000 tonne from 100 tonne earlier.
The official said current grain stocks are above the buffer and sufficient to carry out open market sales. The retail inflation in rice and wheat in June was 11.78% and 12.37%, respectively. The government has stated that the scheme will continue till the cereal inflation starts to decline.
The corporation currently has 25.23 MT of rice, which excludes 14.7 MT of rice yet to be receivable from millers. The rice stock is against the buffer of 13.54 MT for July 1. It needs 36 MT of rice annually for allocation under the NFSA.
The new procurement season (2023-24) for paddy begins on October 1.
A food ministry official said the FCI will continue to sell foodgrains from its surplus stocks till inflationary trend in cereals prices is curbed. The official said current grain stocks are above the buffer and sufficient to carry out open market sales.
As per earlier policy, the corporation had been selling surplus wheat to bulk buyers during the lean season (January-March).
It sold 3.37 MT of wheat under the scheme during February 1-March 15 through weekly auctions. The FCI’s open market sales stood at 7 MT in 2021-22 and 2.5 MT in 2020-21.
In the past many years, the sale of rice through an e-auction has not received encouraging responses.
Officials said the government is discussing several options, including reducing import duty on wheat from the current level of 40%, to control domestic prices.
The government had imposed stock holding limits on wheat for the first time since 2008 for traders, wholesalers and retailers till March 31, 2024 last month to control increase in prices.
This article has been republished from The Financial Express