FCI restricts wheat sale to bulk buyers to 2,000 tonnes

The Food Corporation of India has decided to restrict the upper limit of wheat a trader or bulk consumer may buy at a single e-auction in open market sales, from 5,000 tonnes till now to only 2,000 tonnes. FCI had capped the limit at 500 tonnes last week, but after hue and cry from millers, it raised the limit to 2,000 tonne on Tuesday. 

The aim is to ensure against hoarding by bulk buyers, with apprehension of a repeat on what had happened with pulses last year (surging prices and record high import of six million tonnes) and then for sugar, where a situation of plenty got converted to scarcity. As for wheat, part of the staple diet for so many Indians, its price in the Delhi market has risen by 16 per cent since April. It appears the prices would stay firm, as supply is dwindling.  

Manoj Balgi, procurement head for Britannia Industries, said: “Availability of wheat in the open market is under strain due to lower production, causing an inflation and impacting the prices of wheat-based packaged food products.” Early this month, the company raised the prices of its biscuits, with managing director Varun Berry saying: "In four-five months, flour and sugar have seen severe inflation." Their input cost had risen eight per cent in the June quarter.  

Britannia uses around a million tonne of wheat annually. 

Also, bread loaf prices are on the rise — in some places by as much as 25 per cent — after major manufacturers decided to pass on the higher cost of wheat, sugar and vegetable oil to the customer. 

The wheat stock with the government is falling and the new crop will come only in March. It is estimated to be better, due to adequate rain this kharif season (and if winter is also satisfactory). However, falling stocks will keep the market tight. Globally, as wheat prices are down 12 per cent since April, the government will be opening the doors for import. According to stock reserve norms of the government, in the beginnig of October the stock shall be 20.5 million tonnes, while in August it has already fallen to 26.89 million tonnes. 

Balgi suggests a cut in import duty till the new crop arrives from March on. “While international prices are low, the import duty on wheat is 25 per cent, making it economically unviable. As we enter the off-season, lower availability will result in scarcity of the stocks, resulting in prices going up further. To ensure the availability of wheat at a reasonable price, a cut in the duty should be considered.”