Millers miffed over fifth increase in 5 months

The Union Food Ministry has raised the price of wheat offered under the open market sale scheme to bulk users such as flour mills and small traders for the fifth time in as many months.

The latest hike makes the increase in the price almost 50 per cent to the rate at which wheat was offered in the open sale on July 4.

Wheat was offered at a uniform Rs 1,170 a quintal on July 4. Following protests from mills in North that complained that they will become uncompetitive in the market if the price were to be uniform, the Ministry began to fix prices State-wise, including local taxes and freight charges with Chandigarh as the base.

Under the current scheme of things, the Food Ministry will sell 65 lakh tonnes of wheat from its stocks. Currently, it has released a quota of one lakh tonnes for most of the States barring Himachal Pradesh, North-Eastern States, Andaman and Nicobar Islands, Dadar and Nagar Haveli, Daman Diu, Lakshadweep and Puducherry. For these, the allotment is 25,000 tonnes.

Once this quota gets exhausted, the Centre will decide on the disposing of the remaining quantity.

The Centre is offering stocks from its warehouses as part of its efforts to create storage space for rice and wheat that will be procured during the current marketing season to September.

As on November 1, the Centre had 40.57 million tonnes of wheat against a buffer norm stock of 14 million tonnes.

Under the new pricing formula of the Food Corporation, States in the South and North-East have not to shell more. For example, wheat will now be offered to Tamil Nadu at Rs 1,721 a quintal. In Assam, the foodgrain will be available at Rs 1,822.

Flour mills unhappy

The price hike had resulted in the user industry, mainly flour mills that make wheat products, voicing its disapproval.

“The problem is that wheat is not available in the open market and all wheat stocks are with the Food Corporation of India. Though one wonders how exporters are getting wheat for shipments abroad, it is no secret that this is because of leakage from the public distribution system,” said a South-based miller.

“The price of Rs 1,580 earlier this month itself was high. The current price of Rs 1,778 for Kerala is unaffordable for the mills and consumers,” said P.K. Ahammed, President of Kerala Roller Flour Millers Federation.

According to sources, the problem is the disparity in prices between the North and South. In Punjab, wheat will be offered at Rs 1,484, while it will be offered at Rs 1,750 plus taxes in Karnataka and Rs 1,780 in Kerala. Freight charges are around Rs 200 a quintal but the Food Ministry seems to have charge more, leading to the disparity, they said.

“This itself is leading to artificial rise in prices,” a source said.

“For Kerala from an offer price of Rs 1,170 in July to now, the increase is 52 per cent,” said Ahammed.

“This periodic hike has resulted in prices going up in north Indian markets sharply. The price of Lokwan wheat from Rajasthan has increased to Rs 2,100 a quintal now from Rs 1,520 in April,” he said.

Govt buying

Industry officials such as Ahammed express concern over the rise despite a record production of 93.9 million tonnes (mt) of wheat this year. “The Government has procured a major portion of the record crop,” the Kerala flour mills official said in a letter to Union Minister of State for Food K.V. Thomas.

The Food Ministry has procured a record of over 38 mt of wheat from farmers. This, industry players say, is the main reason why wheat is not available in the open market.

“At this rate, wheat and its products will become unviable for hotels, bakeries and the common man,” Ahammed said.

The Centre should cut the price to Rs 1,580 a quintal for southern states until February, he demanded.

On Thursday, wheat futures for December delivery were quoted at Rs 1,613 a quintal and for January ruled at Rs 1,601.

At the Lawrence Road market in New Delhi that serves as a benchmark, wheat was quoted at Rs 1,620-1,625 a quintal.

Exports of around 3 mt of wheat till now and is projected to ship out 5.5 mt by the end of the current fiscal. Private exporters have shipped out around two lakh tonnes, while Government agencies such as the PEC have exported the rest. Poor crop in the US, Argentina and the Black Sea region (Ukraine, Russia) has led to demand for Indian wheat in the export market.

(This article was published on November 22, 2012)
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