The Hindu Business Line : Wheat situation dicey; Govt need not be averse to imports

WITH less than 10 million tonnes (mt) of wheat stocks in its warehouses and more than four months to go before procurement begins, tightening stock position has officials concerned.

Food managers in the Government find themselves rather awkwardly placed because the situation is rather dicey. The big question is whether imports are necessary. They have to monitor developments on a day-to-day basis as also identify and read signals - both positive and negative - correctly and in time so as to remain on top of the situation.

There is tacit assumption or belief that the Government may just about tide over the mini-crisis and manage to avert what is generally perceived as imminent imports. The stock position is indeed tight.

Stock positions: Some projections suggest that the ending stock as on March 31 next year or opening stock for the new fiscal on April 1 would be one million tonnes versus the minimum stock norm of 4 mt.

For five months between December and April , under normal circumstances, 7.5 mt of wheat would be required (at 1.5 mt a month) for public distribution system, welfare programmes etc.

Already indications of a slowdown in offtake are available. Whether offtake will continue to remain steady at about 1.3 mt in each of the next few months is course a matter of conjecture.

On the other hand, crop prospects, on current reckoning, are rated good.

Whether the crop size will hit the target of 75.5 mt is too early to say. It may be reasonable to expect a crop of anything between 73 mt and 75 mt as compared with 2005 harvest of 72 mt.

Some welcome showers at the turn of the year would do a world of good to the next wheat harvest. Crop-friendly temperatures - cool climate - would be beneficial too. If prices continue to display steadiness, rather than spikes, it is possible that inventory built by the private sector may also come into the market.

FCI conundrum: Perhaps the biggest test in the coming months would be for the Food Corporation of India (FCI); and the acid test is whether or not the agency actually holds in the physical form the level of stocks it claims to hold.

Often, many have wondered about the quantum of actual physical stocks with the Government agency. The reservations about stocks - possible discrepancy between stocks on the register and actual goods in the warehouse - have been real.

In this season of tight supplies, the actual stock position with FCI would be known. One only hopes that FCI acquits itself well. It is also an opportunity for the agency to seriously examine its internal control systems for storage, movement and accounting of grain stocks. McKinsey & Co's report on improving operational efficiency of FCI should be a good starting point.

A new season with opening stocks as low as one mt (if at all) is a situation fraught with risks. The commodity market is unforgiving and hardly benign. With too much money now freely flowing into the commodity sector, the situation could turn explosive.

Although in modest quantity, harvest of wheat crop in Gujarat by the second half of March will bring some relief in terms of augmenting supplies.

Pricing pressure: Even assuming that the next wheat harvest registers 75 mt, there could be a question mark over the quantum FCI would be able to procure because of the price situation. If prices remain above the declared procurement price of Rs 650 a quintal, procurement levels may slow down even further.

In sum, the wheat situation is far from what can be described as "well under control".

Close monitoring of the situation is necessary. The Government need not be averse to wheat imports, should the situation demand. However, timing is important. Given the known timeline of harvest, there shall be no imported wheat arrivals beyond March.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page