Private buyers crowd out government in wheat procurement process

Last Updated: Tue, May 14, 2013 20:30 hrs

The projected fall in the yield of wheat in Punjab and Haryana has led to private traders purchasing substantial quantities of the commodity from producers across India. In Madhya Pradesh and Rajasthan, too, private traders are buying huge quantities of wheat, despite a bonus on the prices. Owing to this, the government procurement target for this year has been scaled down from 44 million tonnes (mt) to 34 mt.

Sources in the Food Corporation of India (FCI) said procurement might decline to 30 mt.

Last year, state agencies procured 38.1 mt of wheat. Private traders didn't procure any wheat last year.

As wheat prices might rise due to low arrivals and demand from exporters, it is prudent to purchase now, at a price slightly higher than the minimum support price, says Naresh Ghai, president of Punjab Roller Flour Millers' Association. Adi Narayan Gupta, president of Roller Flour Millers' Association of Uttar Pradesh, said this year, private traders were aggressive, as low procurement might affect the release of wheat through the open market sales scheme (OMSS).

Though government warehouses are overflowing, due to the impending food security Bill, the buffer requirements might increase.

Last year, flip-flops in the government policy on OMSS wheat price had driven mills in the South to buy more from the open market. K S Kamla Kannam, president of the Roller Flour Millers Association of Tamil Nadu, said the wheat price, through OMSS, was reduced from Rs 1,525 a quintal to Rs 1,170 a quintal, before being revised to Rs 1,750 a quintal. Mills in the South had preferred to buy from private traders, rather than from FCI.

An Ahmedabad-based wheat broker confirmed exporters were lifting wheat, as they had to complete the shipments between May 15 and May 30. At this point, exporters don't stand to gain, as wheat from Ukraine is available at prices lower than that of Indian wheat in the international markets. As Indian exporters cannot default on their commitments, they are selling at a loss.

Though the dwindling yield might result in losses for farmers, government storage agencies, under pressure to arrange additional storage space, could get a breather. A 10-mt fall in procurement may do away with the requirement of additional covered storage space, said an official.

According to sources in the food ministry, Punjab and Haryana could record a 15-20 per cent fall in the yield of wheat. Since the two states contribute about 50 per cent to the central wheat pool, total wheat procurement may be hit. The sources said there might be a marginal decline in total production, as procurement might be affected. "In 2011-12, India registered an eight per cent increase in wheat production over 2010-11. This year, it may remain stagnant or drop marginally," he added.

Indu Verma, director at the Directorate of Wheat Research, Karnal, said, "Rain in March and the consequent-water logging in the fields have hit wheat productivity in the two states (Punjab and Haryana), but because of better seed quality and growing awareness among farmers in eastern states, total wheat production may be about 92 mt."

Earlier, Planning Commission member Abhijit Sen had said this year, the wheat crop might be about 90 mt.

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