FCI begins wheat sale soon after procurement

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Published: June 13, 2015 12:03:38 AM

The government has decided to commence open market sale of wheat in Punjab and Haryana to bulk buyers, just weeks after the grain procurement from farmers for the rabi market season was winded up by the agencies.

The government has decided to commence open market sale of wheat in Punjab and Haryana to bulk buyers, just weeks after the grain procurement from farmers for the rabi market season was winded up by the agencies.

Sources told FE that this is the first time Food Corporation of India (India) has commenced the Open Market Sale Scheme (OMSS) operations for wheat just after the procurement season.

The FCI would commence open market sale of wheat to bulk buyers in other procuring states such as Madhya Pradesh, Rajasthan and Uttar Pradesh next month.

Usually, FCI sells excess wheat stocks to traders and flour millers during September–March period, which is months after the official procurement period of April – June.

At present, the FCI has virtually winded up wheat procurement drive for the current marketing season by purchasing more than 27 million tonne from the farmers in the last two months or so. The wheat stocks have gone up to more than 40 mt at the start of this month. As per buffer norms, the agencies should have a wheat stock of 27.5mt on July 1.

Although the government has continued with the open market sale of wheat in non-procuring states after April 1, yet the response has not been encouraging so far, sources added. Only around 15,000 tonne of wheat has been sold to bulk buyers under OMSS through weekly auctions since April, 2015.

“Although the demand for open market sale of wheat is lukewarm at present, however it is expected to rise in the coming weeks,” a food ministry official said.

The FCI conducts a weekly auction to sell wheat in the open market using the platform of commodity bourse NCDEX. The government has set a reserve price of R1,500 per quintal plus freight cost to consuming locations.

Besides, buyers have to pay 5% extra on the base price for last year’s wheat crop (2014-15 season), the procurement ended in June, 2014.

The High-Level Committee (HLC) for FCI restructuring chaired by former food minister Shanta Kumar in its report earlier this year had observed “during the last five years, on an average, buffer stocks with FCI have been more than double the buffer stocking norms costing the nation thousands of crores of rupees loss without any worthwhile purpose being served.”

HLC had stated that the current system is extremely ad-hoc, slow and costs the nation heavily. “A transparent liquidation policy is the need of hour, which should automatically kick-in when FCI is faced with surplus stocks than buffer norms. Greater flexibility to FCI with business orientation to operate in OMSS and export markets is needed,” the committee had observed.

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