Government no to cut in OMSS wheat prices

Written by Sandip Das | New Delhi | Updated: Jan 15 2013, 05:45am hrs
The Centre has ruled out a reduction in wheat prices sold under the Open Market Sale Scheme (OMSS) to bulk buyers due to a rising food subsidy burden.

Food minister KV Thomas told FE that 'sufficient' quantity of wheat had been allocated by Food Corporation of India (FCI) from its stocks, around 34 million tonnes, at the start of the month for the OMSS. OMSS prices are reasonable and we do not want to reduce it further, Thomas said. He said the food ministry's prime job is to ensure that there is enough stock for the Targeted Public Distribution System (TPDS) and adequate under strategic reserve and buffer stocks norms.

There is a cost of holding and procuring wheat. Thus, we do not want to review the OMSS prices now, he said. As per the latest data, more than 6.4 million tonnes of wheat had been allocated under OMSS during current fiscal out of which bulk buyers have lifted close to 3 million tonnes till the end of November. During last few months, traders have been pushing for more allocation of wheat under the OMSS, which the FCI had launched in 2008-09 for selling excess stocks to bulk buyers.

For wheat-consuming states in southern, eastern and western regions, the FCI had fixed the price on the basis of minimum support price (MSP) and freight cost from Ludhiana. For wheat-producing states such as Punjab and Haryana, OMSS prices have been fixed on the basis of MSP and applicable state taxes paid by the FCI during the procurement of the grain.The price of wheat offered to bulk buyers under the OMSS had been fixed at R1,485 per quintal (Punjab), R1,460 (Haryana), R1,350 (Rajasthan), R1,404 (Uttar Pradesh) , R1,535 (Kerala), R1,476 (Andhra Pradesh) and R1,480 (Tamil Nadu)

The record wheat procurement last year of close to 39 million tonnes 41% of the total output -- by the FCI and state-government owned agencies in Punjab, Haryana and Madhya Pradesh have also contributed to the lack of availability of the key grains in the open market. The wheat procurement drive for 2013-14 by FCI will begin on April 1. Meanwhile, sources told FE that the food ministry has written to the Punjab and Haryana governments for reducing taxes on the local purchase of wheat.

Punjab and Haryana levy taxes at the rate of 14.5% and 11.5% for every quintal of wheat purchased from these two states, which accounts for close to 80% of the total wheat produced in the country. During last five years, wheat procurement by agencies such as FCI increased to close to 39 million tonnes from 11 million tonnes in 2007-8, which is an increase of 250%. This has lead to huge stocks with the FCI.