The Centre will need to procure at least 16 million tonnes (mt) of wheat from the ensuing crop to ensure unhindered supplies of the cereal for different welfare schemes and food security. The need arises at a time when wheat prices are ruling 40 per cent above the minimum support price (MSP) of ₹2,125 a quintal.
The Centre asked those eating rotis (flat bread) in some States to avail of rice from ration shops last year after wheat procurement hit a 15-year low. In view of this, the government has limited options to ensure that procurement does not falter this time.
“Earlier, the government was expecting the wheat stock to be around 12.6 mt as of April 1 against buffer and strategic reserve norm of 7.5 mt. However, in view of its decision to offload 3 mt under the open market sale scheme (OMSS), the stocks may fall below 10 mt when the new season starts,” an official source said.
The annual requirement for the National Food Security Act (NFSA) and other schemes is 18 mt. To maintain the buffer stocks norm, an additional 15.9 mt will have to be procured in the next season starting April 1, said the official. However, to run OMSS, there has to be 2-3 mt additional procurement taking the total to a minimum 19 mt. This is after accounting for the carryover stocks of around 10 mt. The official procurement was 18.79 mt from the 2021-22 crop against a target of 44.4 mt.
“Already, export is banned and the government has indicated that it is unlikely to be opened anytime soon. Traders know that if they buy above MSP, the government may impose a stock limit at any point and they will face losses when asked to offload in domestic market,” said a former chairman of the Food Corporation of India (FCI).
He said the Centre in 2007 had informally asked large private traders and corporate to stay away from wheat purchase till official procurement was over. Still, it imported wheat the following year to meet its requirements under the public distribution system as procurement dropped sharply. “There is no harm in repeating it now since food security cannot be compromised,” he said but added that such a step would defeat the spirit of now-repealed farm laws.
Asked if the government was considering announcing a bonus above the MSP, a Food Ministry official did not rule out such a possibility. He, however, said it was premature to speculate what steps could be taken before the arrival of the new crop. “Let’s see how the weather remains in March-April,” he said. The Centre had announced a bonus of ₹50/quintal over and above the price of wheat in the 2010-11 crop year.
Traders said that the decision to release wheat under OMSS is likely to bring down wheat prices by ₹200/quintal immediately and further cool down over the next few days once the actual stock hits the market.
The current pan-India average retail prices are ₹29-41/kg for wheat and ₹34-46/kg for atta (wheat flour) in different zones, as per to Agmarknet portal data.
Fiat for OMSS
On Wednesday, while announcing the release of 3 mt of wheat under OMSS until March 31, the Centre said millers would be given a maximum of 3,000 tonnes per e-auction and the cooperatives like NAFED and Kendriya Bhandar will have to convert the entire quantity to atta and sell the flour at maximum retail price of ₹29.50/kg.
Wheat production dropped to 106.84 mt in the 2021-22 crop year (July-June) from 109.59 mt in 2020-21 due to a heatwave that swept across the country in March-April lowering the yield. Traders and experts, however, peg the production at less than 100 mt, which, they claim, is reflected in the open market price of the grain.