'MNCs should be banned from procurement'

Multinational grain procurement companies were the major cause for the current skyrocketing prices and they should, therefore, be banned said Gopal Lal Seth Mohata, president of the Maharashtra Roller Flour Mills Association, in an interview with Dilip Kumar Jha. Excerpts:

Flour mills are not allowed to hedge their risks in wheat futures markets. Has this affected the business of flour mills?

Not really. Earlier, we were procuring wheat from the physical market according to our requirement. Even today, the same practice is followed, as stocking is not feasible for us. Neither do we have adequate hoarding capacity nor stocking facility.

Therefore, we procure at the time of processing and sell to our customers. Big companies such as Britannia, Nestle and HLL procure their raw materials against advance commitments and face no problem at all.

What is the total requirement of wheat for flour mills in Maharashtra?

Currently, 42 of the 74 existing flour mills are in operation in Maharashtra. Even these running mills operate at half their capacity and face the threat of closure. These mills require about 100,000 tonne of wheat of various qualities every month.

Flour mills are allowed to import directly. Do you prefer booking wheat in spot overseas markets or through MNC companies. What are the differences between the two?

Flour mills cannot import owing to two basic issues "� lower quantity of requirement and quality issues. We buy a mix of good and medium quality wheat for blending. Importing high quality is uneconomical, as the price parity is wider in case of imports. The quality of imported wheat of medium variety is so bad that we cannot process it. Hence, imports in both the cases are not worthwhile.

What is the landed cost of wheat and how do you compare it with the domestic market as far as your procurement is concerned?

The FOB cost of wheat works out roughly to $230 or Rs 1,120 a quintal. Despite the Centre's duty waiver, imports are not feasible, as quality wheat is available at around the same price in the domestic market.

What are the major problems in procurement?

Multinational companies (MNCs) are a major problem in our country and they should be banned from procuring wheat and rice, the two essential and sensitive commodities. Mind you, there were no problems a few years ago when these MNCs were not around. We used to get wheat at cheaper prices throughout the year and process it.

Do you see any linkages between the sale of branded and unbranded flour?

There is no relation between the two. Branded flour sellers use good quality wheat, while we use blended wheat of different qualities. Their customer base is high-profile consumers, while ours are mid-level and low-profile customers such as pav and biscuits makers.

Today, procurement is a serious problem. The MNCs procure wheat at harvest time at dirt cheap prices (slightly higher than the MSP) and sell to consumers like us at higher prices towards the end of the season. This way, they earn nothing less than Rs 300 a quintal.

If this money goes directly to farmer, they will happily cultivate more wheat resulting in higher production the next season. In my opinion, the Food Corporation of India should be the nodal agency to procure food products, especially wheat and rice.

Although, the Centre has encouraged farmers by raising the MSP by Rs 100 and the state government has abolished processing tax, more encouraging steps are required to increase production. All states need to follow Punjab and Haryana, which have restricted multinationals from procuring wheat.