The government will soon take a call on restricting the sale of excess wheat stocks by Food Corporation of India (FCI) through the Open Market Sale Scheme (OMSS) to bulk buyers, mainly because of inadequate stock levels.
Sources told FE that even prior to the commencement of the coming festive season, when demand for wheat usually picks up, FCI has sold close to 2.2 million tonne (mt) of wheat under the OMSS in the current financial year so far, thus depleting the FCI stocks.
The wheat stock held with FCI at the beginning of this month was 24.2 mt. Under the buffer stocks norms, the corporation should have a wheat stock of 20.5 mt on October 1, thus only a couple of million tonne of wheat are left for the OMSS, as the corporation needs about 2 to 2.5 mt of wheat monthly for the Public Distribution System (PDS) till the new crop arrives by April, 2017. In FY16, FCI had sold 7.1 mt of wheat through the OMSS while in the 2014-15, the corporation had sold more than 4.2 mt of grain to bulk purchasers. The food ministry, in consultation with FCI, is set to decide on continuing with the OMSS for wheat to bulk buyers, such as flour millers and food companies, shortly.
Against a target of 28 mt, FCI could purchase only 23 mt during the rabi marketing season (2016-17) that concluded on June 30. The sharp fall in wheat procurement had been attributed to private purchasers buying more wheat from farmers, especially in Madhya Pradesh, where companies based in southern states mostly buy wheat.
The demand for OMSS wheat had been steadily rising in the last couple of months. In August, FCI sold 6.3 lakh tonne of wheat through the OMSS while this month, after the third weekly auction, the corporation has sold more than 5.6 lakh tonne of grain to bulk purchasers.
“The demand for wheat is set to rise sharply especially during October–December and we seems to have inadequate excess stocks of grain to meet the demand under OMSS,” an official said. However, the official said that there is adequate quantity of wheat for PDS.
Under the OMSS, In Punjab, Haryana and Madhya Pradesh, the reserve price of wheat was fixed at R1,550 per quintal. For depots of FCI located outside these states, the reserve price of wheat was fixed at R1,550 per quintal plus railway freight from Ludhiana to the nearest railhead, and road transportation cost from such railhead to the depot.
Officials said that despite selling a substantial quantity of wheat under the OMSS, the corporation had to incurred losses as the economic cost of procuring and storing wheat is Rs 2,344 per quintal. The sowing of wheat will begin in the key producing states of Punjab, Haryana, Rajasthan and Madhya Pradesh after the harvesting of kharif crops by November and December. The crop is harvested by the end of March.