Wheat e-auction for open mkt sale to start from February

The government has decided to sell its excess wheat stocks through e-auction by the Food Corporation of India (FCI) from February. Earlier, the process was slated to be launched in December 2009. Sources told FF that a team comprising top FCI officials are finalising the modalities of e-auction. Following that, it will be presented to a high-level committee (HLC) for its approval prior to the launch of the scheme.

The e-auction intends to cut down prices of wheat offered under the open market sale scheme (OMSS) by reducing transaction cost. ?After getting the report from FCI officials, the committee would take it up for approval,? sources said.

As first reported by FE, the FCI was to launch the e-auction of wheat in Delhi, Karnataka, Andhra Pradesh and Haryana in December 2009 on a pilot basis. Subsequently, it was postponed to January 2010 because of time constraints. The FCI is expected to use the platform of NCDEX Spot Exchange and National Spot Exchange for electronic auction of wheat under the OMSS.

Currently, under the OMSS, the government follows a tendering process, through which it has managed to sell around 3.5 lakh tonne of wheat since October 2009. Another 5.4 lakh tonne have been approved for sale by the HLC, comprising officials mainly from the food and commerce ministries. The committee has been set up to oversee the sale of wheat in the open market.

A million tonne of wheat have been allocated to bulk buyers via open market sale, while 5 lakh tonne has been allocated to states.

After getting a lukewarm response from private traders for OMSS wheat, the empowered group of ministers (eGoM) last month had to reduce the offer price by around Rs 200 per quintal. The sale price, at present, includes FCI?s wheat procurement costs during 2008-09 and freight from Ludhiana.

Currently, wheat is available in Delhi at Rs 1,254 per quintal against Rs 1,437 per quintal as per the previous pricing structure. In Tamil Nadu, the commodity is being sold at Rs 1,401 per quintal and in Kerala, the price is Rs 1,436 per quintal.

The FCI has a wheat stock of 23 million tonne on January 1, 2010, which is far above the buffer stocks and strategic reserves and buffer norms. The FCI had procured a record 22.6 million tonne and 25.3 million tonne of wheat during 2008 and 2009, respectively.

Sale of wheat in the open market through e-auction will also make space for the new rabi crop, which is expected by end of April, FCI officials said.