The Hindu Business Line : Wheat procurement may face storage space woes

“Wheat bought last year in Punjab is still lying in the godowns, while the Centre has also stocked up rice, leaving very little space for new procurement.”

M.R. Subramani

Chennai, March 11 With warehouses almost brimming with wheat and rice, the Union Government could face problems of storage space when it sets out to procure wheat for the buffer stocks from April 1.

The problem is seen imminent as farmers are expected to offload their stocks only to the Government, especially in Punjab and Haryana. This is because the Centre has raised the minimum support price (MSP) for wheat to Rs 1,080 a quintal and the private trade sees it uneconomical to buy wheat from the North in view of market cess, commission for agents and transport charges making it unviable.

“The Centre has said it would procure at least 220 lakh tonnes wheat this year. Going by the MSP, it may have to buy the entire market arrivals in Punjab and Haryana. For example, at least 90 lakh tonnes will have to be procured in Punjab but there is space for hardly 20 lakh tonnes,” said Mr Raj Sud, a trader from Khanna market.

Last year, the Centre managed to procure 226.8 lt of wheat against 111.3 lt in 2006.

“Wheat bought last year in Punjab is still lying in the warehouses, while the Centre has also stocked up rice, leaving very little space for new procurement,” he said.

The Punjab Chief Minister, Mr Parkash Singh Badal, has written to the Centre demanding that grain stocks from the State be moved out quickly to smoothen the process of wheat procurement.

Annual report

Going by the Food Ministry’s 2007-08 annual report, Food Corporation of India (FCI) has space to store grains to the tune of 217.41 lakh tonnes (lt) – 129.48 lt of owned and 87.93 hired, while Central Warehousing Corporation has space to store 98.18 lt (81.20 lt owned) and State warehousing corporations have space to store 193.42 lt (133.33 lt owned). In all, 509 lt of grains can be stored with the aforesaid space.

Buffer stocks

According to the Food Ministry, buffer stock as on January 5 was 175.76 lt of rice and 182.12 lt of wheat. If one were to take into consideration that rice procurement has continued at the same pace during the last two years, then the buffer stock of rice and wheat put together could be in the excess of 360 lt. Rice procurement during the last two season starting October have been over 250 lt.

Punjab & Haryana

“Mills and private trade are unlikely to buy from Punjab or Haryana. Besides footing MSP of Rs 1,080 a quintal, we have to pay an additional Rs 200 a quintal towards market cess, commission for the agents, labour charges and packaging. Then, if we are to move wheat to South India, we have to pay another Rs 180 a quintal as transport charges,” said Mr Pramod Kumar, President of the Karnataka Roller Flour Mills Association.

“While getting wheat from Punjab or Haryana will cost us over Rs 1,450 a quintal, we are currently getting wheat from Gujarat at Rs 1,250 here,” he said.

Madhya Pradesh

Traders say that in a couple of weeks, wheat from Madhya Pradesh will begin arriving and even if they have to pay an extra Rs 50 a quintal, still they would get it in South India at less than Rs 1,350. Wheat from Madhya Pradesh is superior to the ones grown in other States.

“If the Centre fails to pick up wheat on time, then there is every possibility of prices crashing to as low as Rs 900 a quintal,” trade sources said.

Currently, wheat (dara) meant for the mills are currently ruling at Rs 1,150-1,175 a quintal. “Prices have come down a bit in view of farmers selling to have liquidity during Holi,” said Mr Vinod Khanna, Chairman of Wheat Products Promotion Society.

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