The government?s move to offload excess wheat stocks through the Open Market Sale Scheme (OMSS) has again come to a halt as the price prevailing in the market is much below the prices fixed under OMSS.

Sources told FE that in last two weeks after the government discontinued wheat sale under OMSS in key growing states, there has been virtually no takers for OMSS foodgrain in the states where the scheme is still operational.

The government had extended the deadline for sale of wheat under OMSS for bulk consumers till June as inventories soared.

The decision had pulled down wheat markets as traders? anticipated sudden surge in supplies.

The government had allocated 4.2 million tonne of wheat to be sold under OMSS during October 2009 – March 2010 to bulk buyers as well as states to reduce its excess inventories and also to bring down retail market prices. Out of these 2 million tonne was allocated for the bulk buyers.

Sources said while the price of OMSS wheat in Delhi is Rs 1,254 per quintal, the market price is in the range of Rs 1,120-1,150 per quintal. ?There has been virtually no response to FCI tenders as buyers are lifting their stocks directly from the market,? a food ministry official said.

However, bulk buyers have lifted 1.2 million tonne of wheat against the allocation of 2 million tonne while states have just lifted 4 lakh tonne of wheat out of the total allocations. Sources said that states are unwilling to lift wheat allocated by the Centre under the scheme because of inadequate infrastructure.

Though the scheme was announced in October 2009, it could not start in the right earnest because of low purchases from flourmill owners who demanded that government sell its wheat at a price lower than the prevailing market rates.

In November 2009, the pricing mechanism worked out by the High Level Committee (HLC) consisting of officials from the food and commerce ministries included cost of purchase by FCI (minimum support price) along with additional carry forward, storage and freight cost etc.

In Delhi, the cost of wheat was worked out to be Rs 1,437 a quintal while in Kerala it worked out Rs 1,789 per quintal, which was far above the then prevailing market price and the government could sell only 30,000 tonne of wheat.

Subsequently, an empowered group of ministers (eGoM) had to reduce the offer price of wheat by around Rs 200 per quintal in November 2009.