The Centre on June 12 imposed restrictions on processors, stockists and traders specifying how much quantity of wheat they can keep, after a gap of 16 years, ostensibly to check price rise. The government further announced offloading of 1.5 million tonnes (mt) of wheat in open market from official reserves starting June 28, citing 8 per cent increase in prices at market yards (mandis) in a month.
Why are the control measures needed in the main harvesting season (April-June) when the country ‘claims’ to have record production?
As the country is scheduled to have General Election in 2024, the government is concerned about inflation in basic food — wheat and rice. The retail inflation in cereals was 12.65 per cent last month. High price of wheat at the harvesting period also indicates there may be further increase towards January-February 2024 as the next crop arrives from March.
What is the demand-supply in wheat for 2023-24?
The Agriculture Ministry has production of wheat for 2022-23 crop year (July-June) at a record 112.74 mt. However, a private firm, commissioned by Roller Flour Millers’ Federation of India (RFMFI), has estimated output at 102.89 mt, after factoring in 1.35 mt of crop losses following unseasonable rains and hailstorms in March.
Based on the Niti Aayog’s wheat consumption estimate of 97.12 mt for 2021-22, the consumption in current fiscal could be over 100 mt. But, the USDA has pegged India’s domestic consumption at 108.1 mt. It is not clear, whether the country has surplus wheat or if there is any shortage.
What are the wheat prices?
The pan-India average mandi (agriculture crop market yard) prices were ₹2,196/quintal on May 15, ₹2,225 on May 22, ₹2,277 on May 29, ₹2,307 on June 5, ₹2,295 on June 12 and ₹2,310 on June 19. The mandi prices normally have a direct bearing on wholesale and retail rates, though there is a time lag.
Will the 1.5 mt offer for open market sale cool prices?
It is unlikely, as the market behaves fundamentally on demand-supply factor. In May 2022, amid lower procurement of wheat, the government re-oriented the allocations of grains under the National Food Security Act (NFSA) and other welfare schemes by asking people to take rice in place of wheat. As much as 7 lakh tonnes/month of wheat were withdrawn in this process, which also impacted prices since majority of the consumers instead of changing their eating habits all of a sudden, preferred to source the grain from open market. That market distortion is yet to be restored despite 26.2 mt wheat being procured this year against nearly 19 mt in 2022.
Is the reserve price of ₹2,125/quintal for wheat sale not enough?
No. During the previous six rounds of auction when market prices were higher, the all-India average rate of bid price quoted by traders/millers was higher than reserve price of ₹2,125/quintal in each round.
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