At a time when rising wheat prices are already forcing flour makers to increase prices, the Union Food Ministry’s decision to impose statutory and freight charges on the wheat sold in the open market by the Food Corporation of India (FCI) will put additional pressure on millers.
The branded and non-branded flour makers across India confirmed the ministry’s decision would drive up wheat flour prices. Wheat prices in the open market have gone up nearly 35 per cent in last two months on FCI’s open market sale policy changes and export demand.
With the hike in statutory and freight charges, FCI’s wheat prices will certainly go up and hence, revised reserve prices for the open market sale will increase. For the southern mills, prices will be even higher.
Sources in branded flour segment like ITC (Ashirwad atta), Dash Foods Ltd (Shakti Bhog), Bhawani Roller Flour Mill (Risshta brand) confirmed that as the reserved price is being revised, the market will adjust to the new price benchmark. All are waiting for the final notification on it.
"A price revision of wheat flour is inevitable because the industry is already surviving on thin margins," said Adi Narayan Gupta, director of Bhawani Roller Flour Mill.
FCI bears approximately Rs 18.20 per kg of storage and handling charges of wheat and the statutory charges include the levies like mandi fee and labour charges. The statutory charges, according to sources, would be imposed in four wheat producing states--Punjab, Haryana, Uttar Pradesh and Madhya Pradesh. The millers in all other states would buy wheat inclusive of freight charges.
The consistent increase in wheat price due to exports of wheat to meet international demand at a lucrative price of about Rs 1,700 per quintal has affected the availability of wheat for the domestic flour millers.
The reserve price of wheat was Rs 1,285 per quintal till now and it may increase by Rs 200 or more per quintal in the four northern states, where statutory charges have been imposed, confirmed officials from FCI. "We are in the process of calculating the exact revision in wheat price," said one official.
The flour millers in north lamented that they would be at a disadvantage. According to R K Garg, president of the Confederation of Roller Flour Millers of Northern Zone: "Despite being located in the wheat basket of the country, we will not get any cost advantage".
The millers in southern states rue there should be a level-playing field for wheat.
According to Vinod Bansal, director of Bansal Flour Mills Pvt Ltd, Bangalore: "The allocation of wheat to Karnataka is 9000 tonnes. This is too less to match our capacities. The demand of wheat flour in the south is on the rise. The wheat by-products like finilina (suji) are also used in substantial quantities here. The increase in wheat reserve price would affect us badly."
The discriminatory price regime, said Garg, would encourage unhealthy business practices.
"The industry is not against any price revision. But there should be a level-playing field. The end consumer will have to pay more as the industry is running on razor-thin margins and cannot absorb the increase in reserve price," said Vinod Kapoor, a veteran in the wheat flour business from Chandigarh.
