Free food grain for poor brought wheat prices crashing down, say traders
Traders, who stocked wheat during the procurement season between April-June are now upset at the low prices of wheat in the market.Updated: Oct 22, 2020, 14:47 IST
Traders who stocked wheat between April and June, hoping to earn greater profits by selling it later at a lucrative price anticipating a routine shortage in the later half of the year, are now a worried lot.
To their utter disappointment, the wheat prices are at its lowest level in the state and also in the country, thanks to the free distribution of food grains— the government’s welfare intervention under PM Garib Kalyan Yojana to help the poor deal with the economic fallout of Covid-19 lockdown-- that is believed to have dramatically crashed the demand for wheat and flour (aata) in the market, say traders and officials.
“Our firm purchased around 50,000 quintals of wheat from farmers/agents in April-May at or above the minimum support price (MSP) of Rs 1,925 per quintal, fixed by the government. But today mandi wheat is selling for as low as around Rs 1,500 per quintal,” said Rajiv Sharma, manager of Lahoti Food Products Pvt Ltd in Lucknow’s Kasganj.
According to Sharma, (atta) wheat flour and ‘maida’ (all purpose floor) sellers stock wheat in the months of April and May since wheat prices always soar August onwards due to its shortage after farmers sell their produce at the MSP to the government during the wheat procurement season between April and June.
“But for the first time this year, wheat prices started dropping after July and reached its lowest level by September-October. Since the wheat prices are low, the price of ‘aata’ and ‘maida’ is also low in the same proportion, causing losses to the company,” Sharma explained.
He said the wheat price in October last year was around Rs 2,000 per quintal which was above the MSP of Rs 1,840 per quintal.
Rajendra Gupta, a prominent grain merchant in Lucknow, said that traders who had purchased stocks of wheat immediately after the harvesting to sell it later to customers, including flour mills, were in deep trouble this time as the low demand had brought the prices down substantially.
Expressing a similar opinion, Pandey Ganj (Lucknow) Galla Vyapar Mandal leader Satish Kumar Tiwari said the market demand for wheat had been heavily curtailed resulting in a sharp price drop since July. “Few flour-mill owners are buying wheat from us since they do not have customers to purchase flour from them,” he said.
“Now, most people come to us to get their own wheat grinded instead of buying flour from us,” said Lakhan Jaiswal, one flour-mill owner.
According to Sharma, Gupta and Tiwari, the demand for wheat and flour started falling from July when the Central government started distributing free food grain to all ration card holders as a relief measure to mitigate the hardship of Covid-19 lockdown.
“Free government distribution of ration alone is responsible for low demand for wheat and flour and hence the low prices,” Gupta said, “The situation will change only from December after the free ration distribution scheme ends in November,” he added.
Under the free food grain distribution scheme, covering the state’s more than 80% population, each priority household with a public distribution system (PDS) card gets free five kg wheat/rice per head, per month plus one kg ‘chana’ or Bengal Gram per card per month. The Antyodaya families or the poorest families get a fixed quota of 35 kg food grain per card per month regardless of the number of family members.
The free distribution is in addition to the regular food grain they get at a highly subsidized price of Rs 3 per kg for rice and Rs 2 per kg for wheat per head per month under the National Food Security Act.
“If a family, for example, has five members, then it is getting 50 kg wheat and rice every month and this is more than enough for most families, obviating the need for them to buy wheat or flour from the market,” Sharma said.
Food and civil supplies department additional commissioner (marketing), AK Singh also confirmed that the free distribution of ration did have a bearing on the market demand for wheat and on its price. “The impact of the free food distribution scheme on the demand and price of wheat products is quite palpable,” he said.
Sources said a similar situation prevailed in most other states. “In fact, wheat prices are even lower in other states, including Punjab, Haryana, MP, Rajasthan, Gujarat and Maharashtra,” they said, quoting Agmarknet data.