FCI to offload more wheat in open market

Sandip Das

With wheat inflation still at an elevated level, the government is set to scale up open market sales of the grain in the current fiscal.

While usually the sale of the Food Corporation of India’s (FCI) surplus grain stocks under the open market sale scheme (OMSS) takes place in the “lean period” of January-March, this year, it will likely be for a longer period. The sales will likely begin in July and may continue for many months if prices remain firm.

Retail wheat inflation stood at 15.46% in April, compared with 19.91% in the previous month.

Sources told FE that the plan is to offer wheat to bulk buyers like flour millers from all the 700-odd depots of FCI.

Under the OMSS, wheat will be sold at its acquisition cost of `2,350/ quintal which includes Minimum Support Price (MSP) of `2,125/quintal and other costs.

Officials said during the weekly e-auction, wheat would be offered to small bulk buyers, including flour millers, in a smaller quantity such as 100 tonne to each trader per week, per region so that consumers prices come down sharply.

In the earlier auction of wheat carried out during February-March, 3,000 tonne of grain was allocated for each trader per region, per week.

The food ministry’s nod to the open market sale of wheat is expected shortly.

As per the earlier policy, FCI had been selling surplus wheat to bulk buyers such as flour millers and food companies during the lean season (January-March). The government aims at boosting supplies and moderate the prices at regular intervals.

Currently, mandi prices of wheat are ruling around `2,300/quintal while there are regional variations in prices because of additional transportation cost involved.

FCI sold 3.37 million tonne (MT) of wheat to private bulk buyers such as flour millers and food companies 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.

At present, FCI has wheat stock of 31.1 MT. As per the official assessment, the corporation has around 8.7 MT of surplus wheat at its disposal after meeting the requirement under the National Food Security Act and buffer norm in the current year.

Under the open market sale policy, the government allows FCI to sell foodgrains, especially wheat and rice, at predetermined prices in the open market from time to time to bulk consumers and private traders.

Wheat procurement by agencies from farmers has crossed 26.19 MT till Monday since MSP operations began on April 1, up 41% on year. Major contributors to wheat procurement so far have been Punjab (12.12 MT), Haryana (6.31 MT) and Madhya Pradesh (7.09 MT).

The agriculture ministry’s estimate of a record wheat harvest of 112.74 MT for the 2022-23 crop year (July-June). However, trade sources had pegged the wheat output in the previous crop year around 104-106 MT.

Meanwhile, the government has ruled out lifting a ban on exports of wheat and products such as atta this year and also considering stock holding limits against possibility hoarding of the commodity.

Sources told FE the aim is to ensure that inflation in cereals, which had witnessed a spike in the last few months, is kept in check.

This article has been republished from The Financial Express