FCI steps up efforts to offload wheat stocks

Sitting on a huge stockpile of foodgrain, more than double the buffer norm, the Food Corporation of India (FCI) has stepped up efforts to sell wheat under the open market sales scheme (OMSS) through online spot exchanges.

FCI has allocated 40,000 tonnes wheat in Andhra Pradesh godowns to the NCDEX Spot. The latter is the spot commodity trading arm of the National Commodity & Derivatives Exchange Ltd and is set to float its first tender later this week. The floor would be sold online to millers at a uniform price.

“Out of 60,000 tonnes wheat in the state, the government foodgrain procurement agency managed to sell only 20,000 tonnes. We will sell the remaining 40,000 tonnes,” said Rajesh Sinha, head of NCDEX Spot.

If FCI manages to sell any additional quantity, NCDEX Spot will get less foodgrain, says FCI Chairman Siraj Hussain.

On October 11, FCI signed an agreement with the National Spot Exchange (NSEL), a Financial Technologies-promoted spot commodity selling platform, for liquidating wheat stocks in Delhi. NSEL has conducted 11 auctions and sold 32,150 tonnes wheat under OMSS.

Despite several government schemes for below poverty line (BPL) families and sale of wheat at subsidised rates to above poverty line (APL) families, the lifting from states has been poor. In the last two months, FCI has sold just four million tonnes wheat.

Against the buffer norm of 20 mt of rice and wheat, the government’s holding on December 1 was 48.44 mt. The wheat stockpile was 23.9 mt, as against the buffer norm of 8.2 mt.

Contrary to the advise of Kaushik Basu, the chief economic adviser to the finance ministry, FCI is not willing to cut procurement this year. “We will continue with our existing procurement centres this season as well and buy foodgrain at the minimum support price announced by the central government. However, if farmers get more from the open market, they are free to sell there,” said Hussain.

Basu recently said that availability of foodgrain in the open market should be doubled to ease prices. Of the country’s overall production of nearly 235 mt, FCI has been procuring over 200 mt foodgrain annually for three years, leaving limited quantity for the open market.

The allocation to states has been raised substantially in the past two months, especially for APL families, at a subsidised rate. The government has allowed additional allocation of wheat at Rs 8.45 a kg to states. BPL families continue to get wheat at Rs 2 a kg. If state governments were to lift the allocations made by the government, FCI would not face the storage problem as acutely as last year, said Hussain.