Govt may reduce wheat price for open mkt

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New Delhi: To make the central government’s much publicised open market sale scheme (OMSS) of foodgrain attractive for bulk buyers, the union food and consumer affairs department in working on a formula to reduce the sale price of the foodgrain sold under the scheme.

Under the scheme the government plans to sell around 500,000 tonne of wheat from its reserves to bulk consumers like flour mill owners and another 10 lakh tonne to states from October to December.

Additionally, it has also allocated around 500,000 tonne of rice to be sold through the open market operations.

Official sources told FE the proposal to reduce the sale price of wheat is being worked out as prices of critical food grain have been rising since the government’s decision to off load a part of its huge wheat stocks estimated to be 28.4 million tonne as on October 2009.

Last year, a scheme of similar nature could find only a few takers as the sale price was much more the prevailing retail price.

In Delhi, wheat under OMSS was selling at around Rs 1,400 per quintal (cost of purchase+carryforward cost+ storage and freight (ex-Ludhiana), while in Kerala, the price was around Rs 1,780 per quintal, which was more than the prevailing retail price.

Subsequently, the government had managed to offload just 1.1 million tonne of wheat to bulk buyers out of the total allocation of 1.4 million tonne and sold just 73,000 tonne of wheat to states, from the total allocation of 990,000 tonne.

As per the existing price formula being worked out by the government, the wheat will be sold to bulk consumers by arriving at a price, which includes cost of purchase, storage cost and freight cost (ex-Ludhiana).

“The basic idea behind the new formula is to reduce the cost of wheat by Rs 150 – Rs 300 per quintal which will make it attractive for the bulk buyers,” an official source told FE.

The food ministry is expected to present its new proposal before an empowered group on ministers meeting scheduled for November 12, 2009.

Sources said, another reason for making OMSS more attractive for bulk buyers was the high buffer stocks.

“The Centre will have to offload wheat stocks before March 2010 when the new arrivals begin and by fixing a lower price of wheat under OMSS it will also keep inflation under control,” sources said.