OMSS price hike for bulk buyers may push market wheat cost up

Written by Sandip Das | New Delhi | Updated: Nov 23 2012, 08:51am hrs
The government's move to hike wheat prices supplied under the Open Market Sale Scheme (OMSS) to bulk buyers is expected to push up the prices of grain.

To exhaust surplus wheat stocks held with various state procuring agencies and Food Corporation of India (FCI) from Punjab, the government has fixed OMSS prices at R1,484 per quintal which is an increase of R199 over the minimum support price offered to the farmers.

The OMSS wheat prices for Punjab has been taken as base price besides consuming states would have to pay taxes and freight over it. At present, Punjab has a wheat stocks of more than 13.6 million tonne which is far above the storage capacities available with state agencies.

We want to upload excess stocks in the market so that we can create space for new crop, said food minister KV Thomas.

Under OMSS pricing for Madhya Pradesh and Uttar Pradesh, the government has fixed the prices of wheat grown in the state at R1,414 per quintal and R1,403 per quintal respectively while grain coming from Punjab would have higher prices.

Prices of wheat is expected to go up as the government has decided to upload OMSS wheat at market rate, said Adi Narayan Gupta, the president of Roller Flour Millers Federation of India. OMSS was launched in 2008-09 to sell excess stocks to bulk buyers.

According to data available with the department of consumer affairs, retail prices in Delhi and Mumbai have been stable at R19 and R25 per kg, respectively, in last one month. However, prices of wheat have started to move up to R28 a kg at present from R25 per kg prevailed a month ago in both Hyderabad and Chennai.

FCI would sell 3 million tonne of wheat to bulk consumers in the open market in the next few weeks. Every consuming state is expected to get 1 lakh tonne of wheat as part of OMSS allocation and FCI has been authorised allocate wheat as per demand in various states, a FCI official said.

For wheat-consuming states in southern, eastern and western regions, FCI had fixed rates on basis of minimum support price (MSP) and freight cost from Ludhiana which was valid till October. For Punjab and Haryana, OMSS wheat prices was fixed on the basis of MSP and applicable state taxes paid by FCI during the procurement of grain.

As reported by FE earlier, with FCI was holding 40 million tonne wheat at the start of the month, there had been scarcity of wheat in the open market. The government has surplus wheat stocks because of record production in excess of 93 million tonne last year.

Recently, the Cabinet Committee on Economic Affairs (CCEA) had approved sale of 6.5 million tonne of wheat under open market sale scheme (OMSS) through the tender process. In June, CCEA had approved 3.3 million tonne wheat under OMSS. Of which, more than 3 million tonnes has already been sold to bulk users.