Foodgrain stocks in the Central pool have scaled to an all-time-high of 65.60 million tonnes (mt), bringing back memories of the early-2000s. Then, some 34 mt of rice and wheat in government godowns were exported at throwaway prices.
The 65.60 mt stocks as on June 1 – comprising 37.83 mt wheat and 27.64 mt rice – surpasses the previous record of 64.83 mt that was reached on the same day of 2002.
The current level of inventories is more than the combined grain storage capacity of 63.36 mt available with the Food Corporation of India (FCI), Central Warehousing Corporation and the various State Warehousing Corporations.
The fact that the 63.36 mt also includes around 5.9 mt of crude CAP (covered and plinth) structures created to store grains in the open only makes matters worse. The overflowing granaries now are a result of a bumper crop, especially of wheat, and remunerative procurement prices paid by Government agencies.
Wheat today sells at Rs 1,150-1,200 a quintal in most northern mandis and below Rs 1,100 in Gujarat, against Rs 1,230-1,250 at the same time a year ago. Prices in Gujarat are lower since most arrivals are over and only inferior quality wheat is brought to the market by farmers.
Private trade and flour mills, especially from the South, this time bought most of their requirement from Gujarat. A little above 79,000 tonnes wheat have been procured by Central and State Agencies against total arrivals of 6.89 lakh tonnes.
In Madhya Pradesh, the procurement has been 4.8 lakh tonnes against total arrivals of 6.1 lakh tonnes. In Punjab and Haryana, the wheat granaries of the country, procurement has been nearly 98 per cent of the total arrivals of over 17.5 lakh tonnes.
Currently, wheat from Gujarat at the gate of a flour mill in South costs Rs 1,350-1,400 a quintal.
During the peak arrival period in April-May, open market prices ruled well below the official price of Rs 1,180 a quintal, leading to the FCI and State agencies buying nearly 27.5 mt or a third of this year's total estimated production of 84.27 mt.
Last time round, the then National Democratic Alliance Government addressed the ‘problem of plenty' mainly by resorting to exports.
Between 2000-01 and 2003-04, 33.6 mt of grain from Government stocks were issued to exporters at prices as low as Rs 396 a quintal for wheat – less than the corresponding rate of Rs 415 for below poverty line consumers. The irony then was that Indian wheat was used as cattle feed abroad.
The present Congress-led United Progressive Alliance regime is yet to take a call on allowing export of grain even from the open market, leave alone from FCI warehouses.
The Union Food and Consumer Affairs Minister, Prof K.V. Thomas, has ruled out any exports till a final shape is given to the proposed National Food Security Bill, which could generate an annual offtake demand of up to 62-63 mt. In the interim, the options for liquidating surplus stocks are not too many.
Efforts by the Centre to offload wheat through the open market sale scheme have not met with success because the private trade finds it cheaper to buy from the open market rather than from the Government's warehouses.
“The Government may have to resort to exports soon. But when is a question that no one can answer,” said a miller in South.
Wheat on Chicago Board of Trade ended at $6.72 a bushel or Rs 11,800 a tonne. Wheat prices dropped 11 per cent last week after growing areas in Europe received rains.
“Like sugar, we have lost an opportunity to cash in on the export market,” said an industry source.