The Hindu Business Line : Wheat prices gallop on tight supply — Govt confident of tackling the situation

On Thursday, wheat dara prices increased to Rs 1012.50 a quintal at Hapur, up from the previous close of Rs 975. In the Delhi grains market, it was quoted at a record Rs 966-978, up Rs 25 from the previous close.

Superior grade wheat prices too have begun to rise, with desi wheat from Madhya Pradesh quoting at Rs 1,175-1,255 a quintal.

Wheat prices have been rising since the beginning of this week after having shown a tendency to decline last month. All-round demand from stockists and flour-mills has led to demand outstripping supply.

According to the Food and Consumers Affairs Ministry, the average wheat price in North India slipped to Rs 792.40 a quintal in December from Rs 814 in November.

However, the wholesale price index (WPI) put out by the Ministry of Finance has a different story to tell. According to it, wheat prices have been rising continuously since May with the hike being sharp during the last week of December. For the week ended December 24, the wheat price index rose to 195.7 per cent. (Base: 1993-94 = 100)

"We are monitoring the retail prices closely at all our centres and broadly they are in control, though the prices did move up around late November and early December," said Mr R.N. Das, Secretary, Department of Food and Consumer Affairs and Public Distribution.

He also said the Centre had decided to release 1.5 lakh tonnes of wheat every month from January in the open market to control the prices.

On rising wholesale prices, he said: "The link between the retail and wholesale price is not always proportional."

Wheat prices have increased on lower than anticipated production last season (July 2004-June 2005) and falling stocks with the Food Corporation of India.

In the 2005-06 season, wheat production is projected to have slid to 72 million tonnes from 72.11 million tonnes the previous year.

At the same time, stocks of wheat are below buffer norms. As per the Food Ministry's revised norms, the country should have a buffer stock of 8.20 million tonnes of wheat and 11.80 million tonnes of rice.

Though, overall, foodgrain stocks match the buffer norm, the granaries have only 6.01 million tonnes of wheat and 14.08 million tonnes of rice as on January 6.

According to the Food Ministry, wheat stocks can help meet the demands of the targeted public distribution system for four months.

Though imports are talked of as an option to tide over the current situation, the Agriculture and Food Minister, Mr Sharad Pawar, has ruled out such a move. His statement stems from the Centre's view that wheat arrivals due from March-end could help, though the Food Ministry expects buffer wheat stocks to decline to 1.5 million tonnes by April 1.

Wheat production is estimated to be higher this year. A figure of 74-76 million tonnes is being put out by experts and trade, though officials say that it is too early to make an estimate, given the various climatic conditions that determine the final outcome of the crop.

As on December 30, the area under wheat was up at 242.96 lakh hectares against 240.88 lakh hectares during the corresponding period last year.

The futures trend also seems to reflect the Centre's confidence. On the NCDEX, wheat for March delivery was quoted at 847.60 a quintal, while on the MCX it was quoted at Rs 890. For April, the prices are seen even lower at Rs 742 on the NCDEX.