Top officials have called a special meeting on Friday to find storage space for over 21 million tonne (mt) of wheat that the government will purchase from farmers over the next one year, on top of the around 11 mt it expects to hold by April 1. Sources said a high-level team drawn from the Union food ministry, nodal procurement agency Food Corporation of India (FCI) and state administrations are scheduled to meet in Punjab.
As wheat production has soared, this year?s harvest was a bumper 78 mt, retail prices have stabilised at levels that now make it uneconomical for states to lift their monthly stock of grain for the targeted public distribution programme that feeds India?s 220 million people below the poverty line. Around 10 mt of wheat is lifted by states every year to supply the PDS system and for armed forces personnel.
With close to 23 mt already procured by FCI and state agencies this year–far above the target of 15 mt–the agency has been forced to seek additional storage space for the new crop in Punjab and Haryana, the country?s largest wheat producing states. Sources told FE that FCI would start its rabi season procurement drive in these two states next month, while it already held reserves of more than 15.3 mt on March 1, 2009, against 6.5 mt last year.
According to the latest figures, FCI has already procured 44,284 tonne of wheat in Rajasthan, Madhya Pradesh and Gujarat prior to the crop-marketing season that starts from April 1. FCI may ask state governments to create additional capacities through private participation for 9 mt in Haryana and Punjab prior to the commencement of the procurement season. Separately, the government is also mulling an easing of the wheat export norms to facilitate more private buying.
Last month, Union agriculture minister Sharad Pawar stated in Parliament that due to record wheat procurement in the 2008-09 season, FCI faces a severe shortage of storage space in states like Haryana, Punjab and UP, just before this year?s procurement season begins. Sources said the problems would be compounded if additional storage space were not created over the next few weeks as the country is expected to produce close to last year?s record level of 78.57 mt of wheat.
Although state government agencies receive a holding fee for storing wheat, many states are unwilling to allocate more space, as they want to get rid of their old stocks first. FCI has permanent (covered) storage facilities for 24 mt and temporary capacity for another 10 mt across the country.
Due to stable prices and a comfortable storage position, even the government?s attempt to sell 2 mt of wheat under the Open Market Sale Scheme launched in September 2008 received only a lukewarm response from states and bulk purchasers. Wholesale wheat prices have been stable at Rs 1,080 per quintal for the last few months. ?The price stability and higher minimum support price have been positive news for consumers and farmers,? FCI former CMD Aloke Sinha told FE.
In 2006-07 and 2007-08, the government had procured only 9.2 mt and 11.1 mt, respectively. This forced the government to import wheat.