The Food Corporation of India (FCI) has invited bids for sale of almost 950,000 tonnes of wheat from its own stocks at a floor price of Rs 1,484 a quintal, non-inclusive of transportation cost from Punjab and Haryana. The wheat is meant for export under Open General Licence (OGL).
This wheat was procured in the crop marketing year which concluded on March 31, 2012. According to an official statement today, 409,826 tonnes of wheat is being offered for export from FCI warehouses in Haryana and 540,000 tonnes from Punjab-based warehouses.
This is the first time FCI has invited bids from private traders for export of wheat stored in its warehouses. Earlier, only government-owned trading companies such as State Trading Corporation, Projects and Equipment Corporation or Minerals and Metals Trading Corporation were allowed to sell FCI wheat. The government has a plan to export around five million tonnes through this method.
Earlier, it managed to export another 4.5 mt of wheat from its stocks but all of that was through state-run trading companies. The exports are because FCI has a record stock, of almost 60 mt of foodgrain as on April 1, as against the required 21.2 mt. Of this total, 24.2 mt is wheat, against the needed buffer stock and strategic reserve requirement of seven mt; rice stocks are estimated to be 35.4 mt, as against a requirement of 14.2 mt.
The foodgrain stocks are expected to swell to a mammoth 92 mt by end-June, as the government plans to purchase another 44 mt in the new procurement season that has begun from April 1. However, leading traders and private companies are not enthused by the move to liquidate wheat stocks at such high prices.
"The terms and conditions are absurd," said a senior official from a leading multinational grain trading firm. He said there was no parity between the rate at which the government was liquidating its stock and international prices. "Wheat in global markets is now priced below $300 a tonne, while the total cost of purchasing wheat from government stocks (Rs 1,484 a qtl, plus transportation charges and other incidentals) is around $320 a tonne. Who will purchase two-year-old wheat at a higher price and export it at less?" he asked.
If the idea was to encourage private participation in export of wheat from state-run godowns, the government should cut the price, he said.