Despite missing purchase goal, Centre's wheat stocks better than last year

India’s wheat procurement in the 2023-24 marketing season, which started in April, will in all likelihood be lower than the estimated 34.1 million tonnes (MT) and could end below 28 MT owing to heightened private purchases in some major growing areas of Madhya Pradesh, Uttar Pradesh, and Haryana to some extent, together with a drop in production due to relentless rains in March and early April this year.

But though procurement may be less than this year’s estimate, it will still be significantly higher than the multi-year low of almost 19 MT of wheat procured last year. In other words, the Centre will have a far better cushion in terms of wheat stocks this year than it did last year. Plus, with rice procurement being higher than estimated, overall food grain stocks will be far more comfortable in FY24 than in FY23.

July 1 usually sees peak stock levels of wheat, coming as it does right after the main procurement months of April, May and June. Last year, wheat stocks in the central pool as on July 1, 2022, were around 28.51 MT, around a million tonnes more than the requirement for buffer and strategic reserves on the same date in 2021 (27.58 MT).

The last time, wheat stocks in the central pool were lower than this on July 1 was almost 14 years ago in 2008 when stocks were pegged at 24.91 MT.

The July 1, 2022, stock level was also the nearest the stocks have reached to the buffer and strategic reserves on July 1, since the stocking norms were altered on January 1, 2015, data shows. Before 2015, less wheat and rice were required to be retained as a buffer but with the Food Security Act coming into play, these norms were revised in 2015. A small change was also made in 2017.

In sharp contrast, rice stocks in the central pool as on July 1, 2022, were estimated at 31.5 MT, more than double the requirement of 13.5 MT (excluding around 23.15 MT of unmilled paddy lying with millers).

In total (both wheat and rice), the data showed that as on July 1, 2022, India had around 83.36 MT of food grain in stock, the lowest in the last three years (this does not include coarse cereals, which is nominal, but includes unmilled paddy).

The Centre’s wheat procurement in FY23 dropped by almost 59 per cent to 18.78 MT compared to the same period in FY22 as farmers opted to sell to private traders outside the official procurement system due to high prices, while overall production also suffered.

Wheat production in the 2021-22 crop season ending in June was initially pegged at 106.41 MT, according to the third advance estimate. This was later revised upward to over 107 MT.

But the situation is better this year. As on May 1, 2023, India food grain stocks in the central pool were around 55.53 MT (excluding 22.69 MT of unmilled paddy). During the same period last year (May 1, 2022), food grain stocks were around 63.61 MT, excluding 26.61 MT of unmilled paddy.

In other words, food grain stocks in the central pool as on May 1, 2023, were around 8 MT less than the same period last year. But, with more than 29 MT of wheat already in the central kitty as on May 1, 2023, and procurement still on, the government might not face the crunch as it faced last year.

Last year, the annual stock requirements for wheat came down after the government changed the ratio under the public distribution system (PDS) last year. This was done to manage the wheat stocks, which were rapidly falling. Under the new ratio, more rice is being distributed through the PDS than wheat. With that, sources said the annual requirement of wheat is around 18 MT, whereas the rice requirement for the PDS is almost 40 MT.

The Central government in early May 2022 had replaced around 5.5 MT of wheat with rice under the Pradhan Mantri Garib Kalyan Yojana (PMGKAY). Thereafter, it replaced another 6.1 MT of wheat with rice under the National Food Security Act. In doing so, the government freed up around 11 MT of wheat to manage its stocks, which had dwindled sharply due to low procurement and production.

Under the National Food Security Act (NFSA), food grains are provided at subsidised rates by the Centre via ration shops, also called PDS, to over 800 million beneficiaries.

Under the PMGKAY — launched in March 2020 to reduce the hardships of people during the Covid-19 pandemic — about 5 kg of free grain was distributed to the NFSA beneficiaries over and above the NFSA entitlements.

However, if the old ratio between wheat and rice is restored, it would mean 24-25 MT of wheat will be required for the PDS. That would mean that the Centre might not have much wheat in its stocks to make effective interventions in the market if prices flare up.

Also, with private traders buying wheat in greater quantities this year, farmers’ reliance on the Centre’s open market sales will be much lower this year, which will put prices under pressure.

But with the Covid-era free food grain schemes rolled back, the stock position may be more comfortable, even as exports have been banned.

Net-net in all its permutations and combinations, the Centre’s wheat stock position in the central pool is much better in FY24 over the same period last year. But whether the old ratio between rice and wheat in the PDS can be restored immediately is the metric to watch going forward.