In an effort to combat hoarding and stabilize the escalating prices of wheat, the government has imposed stock limits on the essential commodity for the first time in 15 years. The measure, which will be effective until March 2024, aims to ensure ample availability of wheat and prevent unscrupulous elements from creating artificial scarcity.
The decision also includes the release of 15 lakh tonnes of wheat from the central pool to bulk consumers and traders under the Open Market Sale Scheme (OMSS). Additionally, the government plans to offload rice to bulk buyers through the OMSS, with the exact quantity to be determined later. Addressing the media, Food Secretary Sanjeev Chopra clarified that the government does not intend to make any changes to the wheat import policy, as the country currently possesses sufficient stock. Furthermore, the ban on wheat exports will continue, and there are no immediate plans to permit further sugar exports.
The imposition of stock limits on wheat comes ahead of the General Elections scheduled for March 2024, aiming to control prices during that crucial period. The last time such limits were imposed was in 2008. Chopra explained that the decision was prompted by the actions of unscrupulous entities who were hoarding wheat stocks, leading to a nearly 8 percent increase in mandi prices over the past month. While wholesale and retail prices have not yet surged to that extent, the upward trend in mandi prices indicates the potential for an increase across the board.
On the implementation side, the government has set a stock holding limit of 3,000 tonnes for wheat traders and wholesalers, 10 tonnes for retailers and each outlet of large retail chains, and 3,000 tonnes at all their depots. Processors have been instructed to limit their stock to 75 percent of their annual installed capacity. All stakeholders are required to declare their stock positions and provide regular updates on the Department of Food and Public Distribution's portal.
If any entity is found to exceed the prescribed stock limit, they must bring their stock within the limit within 30 days of the notification's issuance. To enhance domestic availability and curb prices, the Additional Secretary of the Food Ministry, Subhod Kumar Singh, announced that both wheat and rice would be offloaded to bulk buyers and traders through the OMSS. Approximately 15 lakh tonnes of wheat from the central pool will be released in the first phase via e-auctions, with a lot size ranging from 10 to 100 tonnes per entity.
The reserve price for wheat has been set at Rs 2,150 per quintal for Fair and Average Quality (FAQ) grain and Rs 2,125 per quintal for under relaxed specifications (URS) until December 31. Similarly, the reserve price for rice is Rs 3100 per quintal for private parties until October 31.
Responding to concerns about rising rice prices, Secretary Chopra stated that there had been a 10 percent increase in prices over the past year. By releasing rice through the OMSS, the government aims to signal its intentions to the market and gradually taper prices. He further clarified that the imposition of stock limits on wheat was not solely intended to shield the market from price crises before the Lok Sabha polls, as the wheat harvest commences on April 1. By imposing stock limits until March 31, the government aims to manage availability during that period.
When questioned about the effectiveness of wheat stock limits compared to previous measures taken for edible oils, Chopra emphasized that when there are no stocks available, imposing limits prevents them from entering the market. With sufficient stock in both the government and private sectors, these limits are expected to have a significant impact on price control.
Regarding the possibility of reducing wheat import duty, the Secretary stated that there are currently no plans to make any changes, as the country has an abundant supply. The Food Corporation of India (FCI) holds a significant wheat stock, and farmers and traders also possess substantial quantities. The imposition of stock limits aims to address the issue of hoarding by unscrupulous entities, rather than a shortage of supply.
Chopra affirmed that India has ample stock available, with an estimated record wheat production of 112 million tonnes in the 2022-23 crop year, as per the third estimate from the Ministry of Agriculture. The additional 5 million tonnes produced this year, coupled with the lack of exports, ensures a surplus within the country.
When asked if the government's actions were influenced by concerns of a possible monsoon failure this year, the Secretary expressed optimism that the monsoon would eventually arrive and be normal. The situation will become clearer with time.
