Flour millers have said ex-mill prices for flour (atta) have dipped by ₹600-800 per quintal over the last one and a half months after the Centre began selling wheat under the open market sale scheme (OMSS). The statement comes amid the government’s concern over retail prices of wheat and atta not declining in proportion to their wholesale rates.
The fall in prices will further be reflected in consumer prices once the harvesting season starts in April. The Roller Flour Millers Federation of India has estimated wheat production to be 108-110 million tonnes (mt) and this could also cool prices.
Inflation and GDP are two key issues that have been at the centre stage of policymakers and a bumper harvest of wheat will ease the concern.
Early sowing
Speaking at the Crisil India Outlook seminar on Thursday, Chief Economic Advisor V Anantha Nageswaran said, “If we are able to get through another week with temperatures in the current ranges, I think we may be able to get a good crop (wheat harvest) because of early sowing. And this will have positive chain reactions going forward, for inflation, for agricultural output, for monetary policy, etc.”
The retail inflation rate for the food basket was 5.95 per cent last month, marginally lower than 6 per cent in January. It was 5.85 per cent in February last year. According to the data, retail prices recorded a 16.73 per cent increase in cereals (rice and wheat). The Consumer Affairs Ministry data show that the all-India average retail price of wheat soared 22 per cent to over ₹33/kg in February from year-ago, whereas the spike in wholesale rate was less than 17 per cent.
“We have seen wheat prices rising maximum by 10-12 per cent in any normal year. But due to the lower crop and the Ukraine-Russia war, there was an over 50 per cent rise in prices and it will take time to normalise. As more and more wheat start arriving in mandis, the impact on prices will be seen,” said Navneet Chitlangia, Senior Vice-President of the Federation. At least a month time taken to see any price cut reflected in the retail market and the current offtake from OMSS will soon be reflected in retail rates, he said.
Procurement on target?
If wheat production reaches 110 mt, it will be a record as the previous high was 109.59 mt in 2020-21, when the country had exported an all-time high of 7.2 mt. “The record production in tandem with cooling off prices of wheat will enable the government to procure the targeted 34.1 mt of wheat,” said Pramod Kumar, President of the Federation.
He said flour millers have nothing to do with export and a continuation of the ban may help the government to achieve the targetted procurement. “Though the price parity is not there at the moment as global rates are lower, opening the window will only allow stockist to buy and hold the grain for export at a later stage,” said a Delhi-based miller.
Also read: Shadow of El Nino over growth
According to the Roller Flour Millers’ Federation data, atta prices are currently hovering around ₹2,600-3,000 per quintal against ₹3,400- 3,800 in the last week of January. The government announced the wheat sale programme on January 26 and a total of 3.4 mt out of 4.5 mt earmarked for the purpose got sold through six rounds of e-auction until March 15.
“Had it not been for the timely intervention of the government through open sale, wheat prices would have reached ₹40-45/kg,” said Kumar.
The government has estimated a record 112.18 mt production of wheat this crop year (July-June). The output of the winter-grown cereal dropped to 107.74 mt in 2021-22 due to an unusual heatwave in March last year that lowered yield. But traders and experts estimate the production not more than 100 mt.