The Indian government has imposed a cap on the quantity of wheat stocks that traders and retailers can hold in the country as part of its efforts to rein in surging prices of the grain. The stock limit will be valid till March 31, 2024, Sanjeev Chopra, Secretary, Food and Public Distribution, told reporters on Monday evening. Mandi rates surged 8 per cent in a month, he said.
Besides, there will be 1.5 million tonnes (mt) of wheat to be offloaded in the open market from government stock with an estimated subsidy of up to ₹870 crore.
2007 experience
Announcing the decision, taken at an inter-ministerial committee meeting earlier in the day, Chopra said wheat prices have started showing an increasing trend over the past week as well as in the past month. The prices are yet to reflect in wholesale and retail markets.
Since the higher rates at mandis could soon reflect in the domestic wholesale and retail prices in the coming days, the government issued the stock holding limit notification immediately to make it effective from June 12. The previous stock limit was imposed in 2007.
According to the notification, a limit of 10 tonnes has been fixed for any retail outlet, including big chains, while it is 3,000 tonnes for traders and wholesalers. For processors of atta and other flour products like sooji and maida, the maximum capacity will be either 75 per cent of the annual installed capacity of the mills or 10 months of actual requirement (June 2023-March 2024) based on monthly capacity.
Power with States
The stakeholders have also been asked to declare their current stock in the designated portal and conform to the prescribed limit within a month, latest by July 11. However, as the implementation will have to be done by State governments, there is no single penal provision for those who are found to violate the stock limit. “States will have to decide what steps to take under the Essential Commodities Act against violation of the quantitative limit,” a Food Ministry official said.
“Retail outlets do not keep much wheat as their main sales are atta, maida and sooji. The main target of the move is for the stockists who keep the wheat for nine months of the year after three months of harvesting season ends in June,” said an official source. As stock holding limit can’t be imposed on farmers, they are out of its purview.
Chopra said, “Though there is enough stock available in the country, unscrupulous traders are holding on to the stocks. Even some farmers are holding their wheat harvest, expecting to sell at higher prices.” He ruled out reducing import duty from current 40 per cent saying there is enough stock in the country.
1st tranch of OMSS
The government has procured 26.2 mt of wheat this year against a target of 34.15 mt whereas the Agriculture Ministry has pegged production at a record 112.74 mt. The Food Corporation of India (FCI) had 31.39 mt stocks as on June 1 against 31.14 mt year-ago.
Government data show wheat prices were ₹2,302/quintal at mandis on June 7, up by 8.1 per cent as on May 7. On the other hand, wholesale prices were at ₹2,603/quintal, up 1.4 per cent and retail rates ₹29.17/kg, up 1.1 per cent from the levels a month ago.
On the issue of selling wheat under open market sales scheme (OMSS), the Food Secretary said it is first tranche and more could be released depending on prices and demand. He said the first e-auction of wheat for open sales will start from June 28, for which there will be a uniform reserve price of ₹2,150/quintal for fair average quality (FAQ) and ₹2,125/quintal for under relaxed specifications (URS) up to December 31. Flour mills, private traders, bulk buyers and manufacturers of wheat products can participate in the e-auction and buy wheat between 10 tonnes and 100 tonnes per entity in each round.
There will be a maximum subsidy of₹5.53/kg based on the current economic cost of ₹2,703/quintal. However, as selling prices are likely to be higher than reserve rates, as seen during last e-auction of 2021-22 crop, the overall subsidy may not exceed ₹200 crore for the entire 1.5 mt, an official source said.
The Food Secretary said there will be open market sales of rice for which the government is yet to decide the quantity and timing of auction. The reserve price of OMSS rice has been fixed at ₹3,100/quintal, he said.