After several years, the Food Corporation of India (FCI) will start a new procurement season for wheat without any stocks in excess of the mandatory buffer this year, reports Sandip Das in New Delhi. This is because the corporation, in a bid to stablise the prices of the grain, was rather aggressive in selling its stocks to bulk buyers in the open market. The so-called open market sales scheme (OMSS) operations were despite a sharp 22% drop in wheat procurement in the current (2016-17) marketing season.
On April 1, FCI is expected to have a wheat stocks of around 6.6 million tonne (mt), same as buffer stocks prescribed.
On February 1, FCI had 11.55 mt of wheat stocks when the monthly requirement for public distribution system (PDS) was around 2.5 mt. Sources told FE that as the wheat procurement for the new season (2017-18) begins on April 1, the corporation will have enough stocks to meet the PDS requirement. FCI will be winding up OMSS on March 15. So far, it has sold 4.5 mt of wheat under OMSS to bulk buyers in the current fiscal, and the last weekly auction in the year to sell wheat under OMSS will be held next week.
Due to the rise in the retail prices in the last couple of months, the government a few months ago had removed the import duty on wheat (which was 10%).
The corporation also changed buffer stock norms for allowing one million tonne of wheat to be allocated under OMSS.
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Following a recent consultation with key wheat growing states, the food ministry has decided to procure 33 mt of wheat during 2017-18, which is 43% more than 22.96 mt procured by FCI and other state agencies in the current year. Officials said in anticipation of bumper wheat crop in excess of 96 mt, FCI is confident of meeting the procurement target for 2017-18 season.
Thanks to a lower procurement this year, the wheat import has seen a surge in the last couple of months. Trade sources said the country has already imported around 5 mt of wheat in the current fiscal because of lower domestic stocks.
In FY16, FCI had sold 7.1 mt of wheat through OMSS while in the 2014-15, it had sold more than 4.2 mt of grain to bulk purchasers. FCI has been selling wheat under OMSS to bulk buyers at Rs 1,640 per quintal while the economic cost of wheat has been around Rs 2,344 per quintal.
In November last year, the government had hiked the minimum support price of wheat by more than 6% to Rs 1,625 per quintal for the 2016-17 rabi season from the previous year. As per the agriculture ministry data, wheat is sown in 31.78 million hectare in the current rabi season (2016-17), which is 5% more than the average area sown in the last five years.