Stable prices to aid wheat procurement

With domestic wheat prices remaining stable, government agencies are poised to improve procurement significantly this rabi marketing season.

The prices are expected to keep away speculative traders from investing in wheat as well.

"Wheat prices round the year have remained stable at Rs 1,120-1,130 a quintal. Those who purchased wheat during April-May last year in anticipation of making big profits later on, actually lost Rs 30-40 a quintal since the price rise was not in tune with their anticipation. Such speculative elements will be kept to a minimum this time," said Veena Sharma, joint secretary, Roller Flour Millers Federation of India.

The Food Corporation of India (FCI), the government's wheat procurement and distribution agency, has already bought 20,000 tonnes from Gujarat and Haryana this month.

Procurement in Punjab and Haryana is scheduled to begin from April 1. FCI will have a buffer stock of 5.3 million tonnes on April 1, 32.5 per cent higher than the usual buffer of 4 million tonnes. Wheat output is estimated at over 75 million tonnes this season.

"While international wheat prices have nearly doubled, domestic prices have moved up by a marginal 2-3 per cent. This implies that enough wheat is available in the domestic market. This also means a lower potential for speculation among traders and will assist government purchase," said FCI Chairman and Managing Director Alok Sinha.

In addition to government procurement, purchases would largely be made only by FMCG companies like ITC and Britannia.

"We would just buy enough to meet our flourmills' consumption of two months. Once this quantity is exhausted, we would buy wheat from the open market," said K K Kumar, chairman and managing director of Shakti Bhog Foods, a leading player in the branded flour market.

The increase in the minimum support price for wheat from Rs 750 to Rs 1,000 a quintal does not leave enough scope for a price rise later on.

"If a trader buys wheat in Punjab or Haryana at Rs 1,000-1,030 a quintal, he has to spend another Rs 170 towards mandi charges, transportation and handling. His economic cost in April-May will be around Rs 1,200 a quintal, above which he has to incur monthly storage charge of Rs 18-20. After holding this wheat for five months, his cost will jump to Rs 1,300 a quintal. The government will, in a bid to keep inflation under check, will do everything possible to control prices," said flour millers. Government's wheat procurement of 11.13 million tonnes in 2007-08 marketing season, though higher than the previous year, was substantially lower than the 14.79 million tonnes purchased in 2005-06.

Consequently, import of 1.8 million tonnes was contracted at high prices, leading to criticism by farmer associations and political parties.