To curb the spike in prices, the government on Friday announced further reduction in the reserve prices of wheat to be sold in the open market by the Food Corporation of India (FCI) to Rs 2,150/quintal, from the next e-auction slated for next week.
The reserve prices of wheat of “fair and average quality” announced is marginally higher than the minimum support price (MSP) of Rs 2,125/quintal for the next marketing season 2023-24 (April-June).
The second e-auction was held on Wednesday where 0.38 million tonne (mt) of wheat was purchased by bulk buyers; the average price of wheat realised by the FCI was Rs 2,338.01/quintal, which is close to the base price.
In the first e-auction where 0.92 mt of wheat was sold, the government had fixed the base price of wheat at Rs 2,350/quintal, which excluded freight cost from the depots.
Out of 2.5 mt of wheat offered for open market sale, through e-auction to traders and flour millers, which commenced at the beginning of the month, the FCI has sold 1.4 mt of wheat in the last two e-auctions held.
The government has also reduced the price of 0.2 mt of wheat offered to institutions like Nafed, NCCF and Kendriya Bhandar to Rs 21.50/kg from Rs 23.50/kg. These institutions were offered wheat for converting the grain into flour and selling it at a maximum retail price of Rs 27.50/kg instead of Rs 29.50/kg. The FCI will conduct e-auctions of wheat till March 15, 2023.
“Reduction in reserve price will help in reducing market price of wheat and wheat products for consumers,” according to a food ministry statement.
Food ministry officials said the focus is to reduce wheat prices to MSP level prior to the commencement of procurement by the FCI and state agencies from April 1.
As on Thursday, the FCI has wheat stock of 13.57 mt, while buffer requirement for April 1, 2023 is 7.4 mt.
A food ministry official told FE that in the next two weeks, retail prices are expected to fall sharply because of improvement in supplies, because of open market sale. In addition, wheat crops of early varieties have started to arrive in the market in Madhya Pradesh and Gujarat, which is expected to cool down prices further.
Inflation in wheat prices rose by a sharp 25.05% on year in January, pushing up retail food inflation to 5.94% from 4.19% reported in the previous month.
Under the open market sale policy, the government allows the FCI to sell food grains, especially wheat and rice, at predetermined prices in the open market, from time to time, to bulk consumers and private traders. The aim is to boost supply during the lean season and moderate prices.
The agriculture ministry’s estimate of a record wheat harvest of 112.18 mt for the 2022-23 crop year (July-June) has given a boost to the prospects of the government’s procurement drive for next the marketing season, which begins on April 1.
Due to lower production and higher global demand, the FCI’s procurement in the 2022-23 marketing season (April-June) fell by more than 56.6% to only 18.8 mt, against 43.3 mt purchased from the farmers last year.