Govt rules out distress sale of mustard

Nafed had scrapped six tenders owing to poor bids

The government is firm on holding on to mustard stocks it procured via the National Agricultural Cooperative Marketing Federation of India (Nafed) under the price support scheme, said Radha Singh, agriculture secretary.

"We are not willing to offload at lower price and play in the hands of trade. There will be no distress sale of mustard," Singh told Business Standard.

Nafed has cancelled all the weekly tenders (six consecutive ones) as bids came in at lower prices, largely between Rs 1,600 and Rs 1,650 per 100 kilogram.

The federation's managing director Alok Ranjan has reiterated time and again that Nafed bought mustard at Rs 1,700 per 100 kg and after the carryover costs, the final cost price is around Rs 1,870. Thereby, the federation is not keen to sell below Rs 1,700 per 100 kg. The prevailing market price is Rs 1,615-1,630 per 100 kg.

Further, Singh said, "I disagree with the trade that all edible oils are exchangeable in use and because Nafed is not offloading stocks now, edible oil imports are on a rise."

She added that mustard oil is a class by itself and it cannot be diluted. Also, it is used by many for its colour and pungency and this is not replacable by any other edible oil.

What seemingly is giving the government hope (for a better price) is good price that the daily tenders are attracting. Cumulatively, the federation has sold around 25,000 tonne of mustard via daily tenders, averaging at Rs 1,700 per 100 kg. Also, demand may pick up with festival season round the corner.

Nafed has procured mustard at an all-time high of 20.9 lakh tonne at a minimum support price of Rs 1,700 per 100 kg in 2005-06 . The procurement, which was done in April-June, was made under price support scheme under the centre. Government had initiated procurement of mustard to support prices following a bumper crop.

As per official estimates, the country's total mustard output in 2004-05 (July-June period) is around a record 7.64 million tonne, up 23 per cent from a year earlier. Industry estimates, however, peg the output at 6.25 million tonne.

Nafed had spent around Rs 3,500 crore on mustard procurement in two tranches. The first tranche was of Rs 2,000 crore and the second of Rs 1,500 crore.

Holding on

Nafed has cancelled all the weekly tenders as bids came in at lower prices, largely between Rs 1,600 and Rs 1,650 per 100 kg

Nafed had spent around Rs 3,500 crore on mustard procurement in two tranches.