The government?s aggressive procurement of wheat this season to build up the country?s buffer stock and ensure supplies for the public distribution system (PDS) may result in about 7% increase in the retail prices of the flour, the key ingredient for the processed food industry.
This comes even as the Union Cabinet is expected to take a call this week on raising the minimum support price (MSP) of rice by 30-40%. This would be much more than the price hike for wheat, which was about 18%. The Commission for Agriculture Costs and Prices has recommended raising the MSP for rice to Rs 10,000 per tonne from the current Rs 7,450 for the general grade paddy.
The commodity price hikes could exacerbate the current headline inflation, which has already crossed 8% mark on Friday.
During the current procurement session, the MSP for the farmers was hiked from Rs 850 per quintal of wheat to Rs 1,000 per quintal. The Food Corporation of India (FCI) and other state level procuring agencies have already procured more than 21 million tonne of wheat, compared with 11.1 million tonne procured last year.
While leading retailers like Subhiksha indicated that there is the possibility of a rise in the prices of atta by 5% to 6% over the next few weeks, Big Bazaar, another major player in the retail sector, also had a similar outlook. Wheat is selling at around Rs 16 a kg in organised retail chains currently.