Wheat sale under the open market sale scheme (OMSS) by the Food Corporation of India (FCI) is likely to take time to pick up as arrivals in markets around growing centres continue.
“Stocks are still coming to markets. Once they decline, millers and traders could look to the FCI sale, especially in New Delhi,” said Mr Raj Narayan Gupta, a miller.
However, millers could be forced to rush a little early to the FCI for wheat purchase as traders in Haryana and Punjab are reportedly holding back stocks after the Centre raised the minimum support price for wheat to Rs 1,285 a quintal for the crop to be harvested next year.
“Mills, especially in the South, have ample stocks with them. Immediate purchase is unlikely,” said Mr Pramod Kumar, Executive Director of Bangalore-based Sunil Agro Foods Ltd.
As such, FCI is offering wheat at price that is little lower than the rates at which wheat is delivered at mills gate.
A high level committee of the FCI approved a new OMSS scheme last month to sell nine lakh tonnes of wheat at a price that is seen reasonable by traders and flour mills. Under the scheme, valid till March 31, bulk buyers and traders will be offered 8.10 lakh tonnes and small traders the rest.
While deciding to sell wheat at the current minimum support price of Rs 1,170 a quintal, the FCI panel agreed to levy a transport charge that would be 50 per cent of the cost incurred to move wheat from growing areas to a particular State.
Accordingly, FCI has set a base price of Rs 1,186.74 a quintal for sale of wheat in New Delhi, while it will be Rs 1,238.52 in Maharashtra (See Table).
Currently, wheat costs Rs 1,300-1,320 a quintal at mill-gate in Bangalore against Rs 1,300 for getting FCI to roller-flour mills. This includes the transport charge for moving wheat to the mill from the FCI godown.
Dara wheat that is used by the flour mills was quoted at Rs 1,150-60 a quintal in Punjab and Haryana on Tuesday,
“About 2,000 tonnes of wheat offered in Karnataka by the FCI have been bought,” said Mr Kumar.
“The FCI has been mandated to sell 6,100 tonnes of wheat in six months time. Each flour mill in Tamil Nadu can get some 400 tonnes. We expect all the quantity to be sold by the FCI,” said Mr M.V. Balasubramaniam, Director of the Salem-based Narasu Flour Mills.
Ration shops
A miller said that the FCI open sale could be affected by wheat that is being diverted from ration shops. “At least 40 per cent of the wheat that is meant for the public distribution system is available in the open market,” the miller said.
“The Government could cut the allocation for the public distribution system to curb such diversion,” said Mr Kumar.
“Mills in Uttar Pradesh may not buy the FCI wheat since they have to foot an additional 12.5 per cent as tax, including value-added tax,” said Mr Gupta.
However, there is one hitch with the FCI sale. It is offering crop from 2008-09, 2009-10 and 2010-11 seasons.
“Stocks from 2008-09 seem to be good since they have been preserved well,” said Mr Kumar.
Higher output likely
With the Centre raising the MSP, wheat production could be higher next year on increased coverage.
“Wheat sowing will be higher this time in view of the higher MSP. But the Centre may have to procure more too,” said Mr Gupta.
The Union Agriculture Minister, Mr Sharad Pawar, and the Union Minister of State for Food, Prof K.V. Thomas, have said that wheat production would exceed this year's record 86 million tonnes.
Procurement up
Besides, procurement of wheat for buffer stocks was higher at 28 million tonnes.
Traders and millers are of the view that the Centre's procurement next year could be around 30 million tonnes, especially if prices in the open market crash.