In a significant move towards bringing down foodgrain prices and controlling rising inflation, the government on Wednesday approved the sale of 1 million tonne wheat in open market via state governments during the period between September and October.
This allocation of wheat to states for open market sale would be over and above the monthly allocation of 1.2 million tonne of food grains, given to states for distribution through public distribution system (PDS). A committee of secretaries in a meeting cleared the proposal for open market sale.
Official sources told FE that the wheat would be sold at MSP without taxes plus actual transportation or freight cost. This would effectively mean that states would get the wheat at a rate of Rs 1,000 per quintal plus the transportation charges from Punjab or Haryana to the concerned state.
In July 2008, the Cabinet Committee on Economic Affairs (CCEA) gave a green signal for allowing the open market sale of wheat as state-owned Food Corporation of India (FCI) and state governments-owned procuring agencies lifted close to 24 million tonne of wheat against the target of 15 million tonne during the recently concluded Rabi season.
As per the guidelines of the open market foodgrains sale programme, state governments will distribute the food grain to retail consumers while FCI would sell directly to the bulk buyers through an open tender system.
Earlier, agriculture minister Sharad Pawar said that government has enough wheat stocks to sell up to 6 million tonne of the food grain in the open market. The open market sale would definitely impact the wheat prices across the country. In the wholesale market, wheat is currently selling at Rs 1,100 to Rs 1,200 a quintal in Delhi and Rs 1,500-1,600 a quintal in the southern states. With the procurement of rice for the Kharif season to begin by October, the government wants to sell off excess rice the FCI and state agencies hold in their godowns. FCI and the other state-owned procuring agencies are estimated to have a stock of 26 million tonne of wheat.
Pawar said the government has kept 5.5 million tonne wheat as a buffer stock against the buffer norm of 4.5 million tonne. Besides, it has also allocated 3 million tonne as strategic reserve and another 3 million tonne only for open market sale.
India?s wheat procurement in the marketing year that started April 1 had reached an all-time high of close to 24 million tonne. Good weather, rise in acreage, timely availability of seeds and other plant nutrients and an Rs150 per quintal increase in the minimum support price have been touted as the main reasons for the sharp jump in production. FCI procured wheat at the minimum support price of Rs 1000 per quintal.
This massive procurement of wheat is more than double the procurement the government agencies had done last year. During 2006-07 and 2007-08, the government procured only 9.2 million tonne and 11.1 million tonne, respectively. This forced the government to import wheat.
The country?s wheat production in 2008-09 is also tipped to reach an all-time high of around 78.40 million tonne, up from 75.81 million tonne last year.