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Mumbai, April 5 The Union Government has purchased 1.8 lakh tonnes of wheat on “call option” at a price of $406 a tonne cost and freight at a premium of $35 a tonne.

The option to “call” (seek delivery of) the cargo is to be exercised by July 15 by which time there will be reasonable certainty about domestic conditions including Government procurement.

On behalf of the Government, STC has entered into an agreement to purchase the said quantity from the multinational grain major Cargill International. Offer from another multinational supplier was higher and therefore, not accepted.

The transaction was reportedly facilitated by National Collateral Management Services promoted by the commodity exchange NCDEX. By July 15, STC (at the instance of the Government) would have to take a call whether or not to ask for the shipment. If the call option is exercised, the goods should reach Indian shores within 75 days, according to the agreement.

At $406 a tonne, the purchase price of wheat translates to approximately Rs 16,250 a tonne. If the Government decides not to seek delivery, the premium amount of $35 a tonne totalling $6.3 million (equivalent to about Rs 25 crore) will be forfeited.

There could be more such purchases in the offing. “This is the first of a series of purchases the Government is planning”, a person close to the deal said. The Government is doing everything within its capacity to ensure there is no shortage of essential food articles and prices are more or less consumer-friendly.

This is also seen as part of a series of steps the Government has initiated to control inflation. However, the Union Minister for Agriculture, Mr Sharad Pawar, has been talking about a bumper crop of wheat (75 million tonnes) and suggesting that there was no proposal to import.

The minimum support price for wheat has been hiked to a record Rs 10,000 a tonne. There is also talk of an additional incentive in the form of a bonus. Justification for a bonus is currently being debated. There are indications the Government may fight shy of granting a bonus.

The decision to purchase wheat on call option basis is not at all surprising. Indeed, it was predicted as early as this year.

Meanwhile, crop conditions in major wheat growing regions of Punjab, Haryana and Western Uttar Pradesh are reported to be satisfactory. Arrivals have begun on a modest scale in Gujarat, Madhya Pradesh and Rajasthan. Harvest in Punjab and Haryana will begin after April 14 (Baisakhi) and could be delayed further by a week or so.

The private trade is active in procurement. Requirement of declaration of stock and fear of crackdown on hoarding have made the private sector turn cautious, though. The trade would keep off Punjab and Haryana, major producing States, and leave the field open to Food Corporation of India (FCI) for procurement.

It is premature to say with any certainty whether FCI would succeed in meeting its procurement target of 15 million tonnes (mt). Last year, its purchases fell considerably short at about 11 mt. By early June, the government could be reasonably certain about the level of procurement; and the option to import will have to be exercised by mid-July.

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Govt buys wheat on ‘call option’ from Cargill at $406/tonne

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