FCI asks states to lift wheat from open market

The Food Corporation of India (FCI) has, in a bid to curb speculative rise of wheat prices, asked the state agencies to lift the commodity directly under the OMSS (open market sale scheme), said Siraj Hussein, executive director (traffic, sales and procurement), FCI.

"This is for the first time that we asked state governments if they wish to lead this scheme (OMSS). State agencies can lift wheat prices and sell the commodity in the open market. Thus, they will be better equipped to curb speculative price rise," Hussein said.

Further, following OMSS rates which are trading lower than the prevailing market prices, FCI will release higher quantities of wheat in the market in the next two months.

"In January, we plan to release about 1.5 lakh tonne of wheat. In February, we plan to release another 1.5 lakh tonne, but the exact quantity will depend on the market demand," he added.

March, however, will see little sale of wheat as prices begin to crash in anticipation of huge harvest.

"In total, our sale of wheat under OMSS will be about 3-3.5 lakh tonne in the January-March period. Earlier this year, in the April-December period, we have sold about 4 lakh tonne under OMSS compared with 2.3 lakh tonnes last year," Hussein said.

As on January 1, FCI has a stock of 60 lakh tonne wheat. The federation releases about 9 lakh tonne per month for the public distribution system and other government-sponsored welfare schemes.

Overall, FCI is likely to end the financial year with about 25-30 lakh tonne of wheat. From April, the wheat procurement season will also begin.

At present, the rabi wheat crop is facing the brunt of intense cold wave in North India. While cold spell till now has only benefitted the wheat crop, agricultural experts suggest that if the temperatures continue to drop, frost may hit the yield of various winter crops like wheat, mustard and chick pea.

As on 9 January, rabi wheat acreage has touched 253.67 lakh hectares compared with 249.63 lakh hectares last season, according to official data. Till date, this year's acreage for the commodity is, however, slightly lower than the normal area at 262.68 lakh hectares.

Acreage has risen in Uttar Pradesh, Maharashtra, Rajasthan and Gujarat but has fallen in Madhya Pradesh by 6.8 lakh hectares following no rains and lack of irrigation facilities in the Malwa region.

Prevailing prices of wheat are about Rs 935-945 per 100 kg (ex-Delhi). Market players expect prices to continue on upward trend as the supplies are slipping and low government stock.

"Wheat prices usually peak in the first half of March with the new crop harvest likely to begin by last week of March or early April and then slide down on fresh arrivals. As prices touch peak, traders will try to sell-off the existing stock," said an industry expert.

While the government estimates the shortfall in 2005 crop is not significant at 720 lakh tonne (compared with 721.1 lakh tonne last year), market players peg the recently harvested crop at around 690-700 lakh tonne.