With the prices of wheat stabilising in the domestic market due to bumper production and comfortable reserves, the government’s plan to sell two million tonne of wheat in the open market under the much-publicised Open Market Sale Scheme (OMSS) to retail and bulk consumers have been a non-starter.
According to a senior official with Food Corporation of India (FCI), the state-owned procurement agency entrusted with the task of providing wheat to states for sale in open market to retail consumers, the states have not shown ‘any interest’ in lifting wheat.
With the inflation rate dipping to 11.8% last Friday, this can be a bit of good news for the government, as wheat a weight of 1.38% in the wholesale price index.
On September 3, 2008, the government had decided to sell 1 million tonne of wheat in the open market through state governments during September and October. It was decided that wheat would be sold to states at a rate of Rs 1,000 per quintal plus the transportation of cost or freight from Punjab and Haryana (referred as ex-Ludhinana).
As reported by FE earlier, a high power committee chaired by FCI chairman decided to sell wheat at the rate ranging from Rs 1,179 per quintal in Kerala – Rs 1,016.28 in Punjab and Haryana. The buyer would also be required to incur a cost of up to Rs 100 pet quintal towards handling and distribution.
Due to bumper wheat production, the prices of wheat have been stable across the country and it is lower than the prices offered by FCI under the open market sale in most of the states.
In the wholesale market in Delhi, wheat is selling in the range of Rs 1,080 – Rs 1,090 per quintal, while the price is higher in southern states ranging within Rs 1,250 – Rs 1,300 per quintal. Official sources said that the prices in the open market have softened due to bumper production and higher reserves with FCI, which is making open market sale of wheat ‘unattractive’.
“It is highly unlikely that any lifting would be done by the states, as prices have been softened and stable,” a senior FCI official told FE. He said that the government is not ‘worried’ about non-lifting by the states, as softening of prices has benefited consumers.
The wheat output in the current year touched a record high of 78.4 million tonne during the year, while the government procurement also hit an all time high of 22.5 million tonne. The central pool had a wheat stock of 23.2 million tonne till last month.
The FCI official said some states refused to buy wheat under the open market sale scheme, citing absence of a mechanism at the state level to sell wheat directly to retail buyers, while others have refused it as they find prices on higher side.
Besides, the government’s proposal to sell wheat under open market sale to bulk buyers has yet to take start. In August, the Cabinet Committee on Economic Affairs had asked the government to sell about 1 million tonne (MT) of wheat to states under the open market sale scheme and had asked FCI to float tenders for sale to bulk buyers.
“We are yet to hear from the government on the tender process,” the FCI official said. Official sources said, with the wheat prices stabilising due to enough FCI stocks and record production, the government is working out an alternative method to ensure there are adequate wheat supplies in the market.