NEW DELHI: The Centre is strongly disinclined to subsidise wheat purchases by the private sector while opening up sale of wheat from the Food Corporation of India (FCI) in the current marketing season notwithstanding massive stocks that are estimated at over 40 million tonnes by July 1, way over the buffer norm of 17 million tonnes.
The e-sale of FCI wheat in a pilot scheme using an electronic platform to offload stocks began today, replacing the earlier and controversial tender-based scheme. Private trade, against this, may be left with little option but to use the lack of stock holding limtis on wheat and the opening up of futures trade to its best advantage, even as exports stay banned.
But while the news on spot and futures prices for wheat may be dampeners for private trade, consumer prices seem set for marked tempering. The fact that the government has huge wheat stocks will also keep price upspirals checked.
With an empowered group of ministers (EGoM) headed by finance minister Pranab Mukherjee expected to meet soon to take a decision on possible exports__there are strong indications that this will be flatly rejected__the Centre is considering both cutting issue prices for consumers (especially APL) on the PDS and hiking the allocation of wheat to needy PDS consumers in order to offload stocks. The government purchased 22 m tonnes in the 2008-09 season and is expected to buy around 25 m tonnes this year.
"Under no circumstance will there be any additional concessions to millers in FCI sales. We already subsidise their costs. Besides, we have no surplus stocks and this is a food deficit year," a well placed food ministry official told ET. Exporters contend though that there is more connection between wheat MSP and domestic food inflation than with export prices.. There are no stock holding limit restrictions on wheat at present.
In addition, wheat futures trade has also been opened up. Interestingly, it is the private sector that vociferously opposed bans on futures trade by the government in the past two years, arguing that this prevented optimum realisation of price. However, the wheat futures market is currently bearish and spot prices, though steady, are likely to go down by end April.
Currently, the food ministry has no plans of reviving the controversial tender-based wheat sales for FCI stocks but could review this in September, at the onset of the kharif marketing season, should output be good. Of the 2.0 million tonnes of wehat allocated for bulk buyers between Octoebr 2009-March 2010, only 1.1 million tonnes (about 56%) was contracted for sale. In the case of state governments, of the 2.0 million tonnes allocated, only 372,593 tonnes (about 18%) was sold.
Source : The Economic Times