Economy News

Govt may resume open market sale of wheat next month

Having addressed the tight wheat stock situation with higher-than-usual procurement, the government is keeping its fingers crossed and has decided to take a call on whether to resume open market sale of the grain next month after assessing the market sentiments.

Food ministry officials said while the government is keeping a close watch on market prices of wheat, projected procurement of around 27 million tonne (MT) in the 2024-25 marketing season (April-June), is adequate to carry out bulk selling of wheat in the market if prices start flaring up in coming months.

“Compared to last year, we are in a better position as far as wheat stocks are concerned and all options for the market intervention programme are open,” an official told FE.

At the beginning of the season, the food ministry had projected 30-31 MT of wheat purchase during the current season, however lower volume of purchase at 4.78 MT in Madhya Pradesh against the target of 8 MT has impacted overall procurement.

Till Wednesday, wheat purchases by agencies have crossed 26.29 MT, against the 2023-24 season’s purchase of 26.19 MT.

Five agencies entrusted with procurement in Punjab, the biggest contributors to central pool stock, are set to procure a record 12.5 MT of wheat in the current season, out of which 12.4 MT has already been purchased from the farmers

The official said that traders have purchased wheat from farmers at above the minimum support price (MSP) of Rs 2,275/quintal for the current season in anticipation that prices will rise after the procurement season gets over. ‘We will assess the supply situation next month as currently prices are stable,” according to the official.

At the beginning of the current season on April 1, wheat stocks in the central pool fell to a 16-year low at 7.5 MT precariously close to the buffer of 7.46 MT, against 8.3 MT of grain stock on April 1, 2023. “Lower stocks at the beginning season are compensated by higher procurement this season,” the official said.

Annually, the government needs 18.4 MT of grain for social welfare schemes including the free ration scheme – Pradhan Mantri Garib Kalyana Anna Yojana. Current stock with the Food Corporation of India (FCI) is around 28 MT, which would be adequate for carrying out a market intervention programme.

In FY24, the FCI had sold a record 10 MT of wheat to bulk buyers at tame prices. Besides selling wheat in the open market through weekly auctions last fiscal and the government also launched the ‘Bharat atta’ initiative, where agencies such as Nafed and NCCF, since last year, have been selling flour at Rs 27.50/kg in the retail market.

Last year, the government commenced selling off surplus wheat through open market sale to bulk buyers in June while in January, 2023 retail inflation rose to a record 25.05% on year. As per earlier policy, the corporation had been selling surplus wheat to bulk buyers like flour millers only during the lean season (January-March).

Retail inflation in wheat rose to 6.02% in April while price rise was 4.74% in March, 2024. Modal retail prices of wheat as per the department of consumer affairs data is currently ruling at Rs 28/kg, which has remained unchanged for the last several months.

The government has set a higher wheat production target of a record 112 MT for the 2023-24 crop year (July-June) against an estimated output of 110.5 MT in 2022-23.

“Since the wheat prices are significantly influenced by the MSP, despite higher production, there may be a marginal increase in the prices,”A P Sinha, director, Farlense group said.

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