Anticipating price rise, Centre imposes fresh caps on wheat inventories

Traders can now hold only 1,000 tonnes of wheat, against 2,000 tonnes earlier, according to the new stock-holding order

NEW DELHI: The Centre on Wednesday further reduced the limit of wheat stocks that traders and millers can store at any given point, a step authorities said was necessary to tamp down prices.

A worker sifts wheat before filling in sacks at the market yard of the Agriculture Product Marketing Committee on the outskirts of Ahmedabad (REUTERS)

Restricting the amount of wheat that inventory traders — aggregators, wholesalers and big retailers — can keep for future sales is a measure aimed at thwarting hoarding and shortages, thereby helping to boost supplies.

These restrictions are usually imposed during times of scarcity or high prices. The Centre, in its order on the new caps, said a “total production of 1132 LMT (113.2 million tonnes) of wheat was recorded during the rabi 2024 season and there was ample availability of wheat in the country”.

Traders can now hold only 1,000 tonnes of wheat, against 2,000 tonnes earlier, according to the new stock-holding order. The government has also tightened stock-holding limits for wheat processors to 50% of their monthly installed capacity.

“It’s true prices have been slightly high since last month. I think the measure is appropriate. Limit of 1,000 tonne is not very restrictive, but these limits should be revised when prices cool,” said CP Gupta, proprietor of Cheshta Enterprises, a wheat-trading firm in Kota, Rajasthan.

India’s inflation has remained well above the RBI’s 4% target aim, with retail prices galloping to a 14-month high of 6.21% in October. Food prices stood in the double digits at 10.47%.

Last week, the Reserve Bank of India left its benchmark interest rate unchanged at 6.5% in this year’s last meeting of its monetary policy committee despite a dip in economic growth, citing continued risks from food inflation.

India, the world’s second-largest wheat producer, banned the export of the grain to tame soaring prices after extreme weather trimmed yields in 2022 and 2023, before reversing the prohibition this year.