The Union government is likely sell 2.1 million tonnes of wheat from its stocks in the open market at a federally determined price in a move aimed at easing supplies of the staple and controlling high cereal inflation, two government officials said, requesting anonymity.
Discussions are currently on to finalise the quantity and price at which the government will offload wheat under its open market sales scheme (OMSS), the officials said. Wheat prices have rocketed despite overall consumer inflation showing a declining trend.
“A decision on intervening in the markets through OMSS will be taken in the coming days, may be within a week,” one of the official said, requesting anonymity. Unlike previous years, the government has so far not intervened in the open market this year despite soaring cereal prices mainly because its own food stocks are at a five-year low.
A heat wave in March this year crimped India’s wheat output for 2022-23 to 106 million tonne from 109 million tonnes in the previous year. This came at a time of high international prices due to the Ukraine conflict, which led to large exports from India.
Since private traders were paying higher rates than the federally determined minimum support price for wheat, farmers preferred to sell to them rather than to the government. As a result, wheat purchases by the government for the public distribution system dipped to a 15-year low to 18.79 million tonnes, compared to 44 million tonnes purchased in the previous year.
{{/usCountry}}Since private traders were paying higher rates than the federally determined minimum support price for wheat, farmers preferred to sell to them rather than to the government. As a result, wheat purchases by the government for the public distribution system dipped to a 15-year low to 18.79 million tonnes, compared to 44 million tonnes purchased in the previous year.
{{/usCountry}}This shortfall pushed up domestic wheat prices by 19.67% in November against 17.64% in October, latest official data showed. Wheat continues to trade at a record high despite overall food price inflation easing to 4.67% in November from 7.01% in October
The government’s wheat stock as on January 1, 2023 was estimated to be 15.9 million tonnes, higher than the buffer norm of 13.8 million tonnes applicable on that date, according to official figures.
The government expects robust wheat output from the current rabi or winter-sown season and has a surplus of about 2 million tonnes over the mandatory buffer limit, which it plans to release in the open market. The decision to merge the Pradhan Mantri Garib Kalyan Anna Yojana , a free food programme, with the existing food security programme has also eased pressure on government stocks.
“The government also wants to rein in cereal inflation because it fears prevailing high prices can lead to a repeat of last year’s situation. If domestic prices continue to be high this year, farmers will sell more to private traders, affecting government procurement,” a commodity analyst said, requesting anonymity.
The government banned wheat export in May 2022 to control prices.