Addressing Wheat Hoarding and Ensuring Domestic Availability by Govt.
India has embarked on significant policy reforms to tackle the issue of wheat hoarding and to ensure an ample supply of grain in the domestic market. One key measure involves reducing the stock limit for wheat from the current 3k Tonnes to 2k Tonnes, following the alarming discovery that over 40 Million Tonnes of wheat have been amassed in the country, surpassing the existing stock limit provisions.
Furthermore, the government is actively considering a substantial reduction in the import duty, potentially bringing it down to zero from the current 44%, inclusive of cases. These measures are intended to effectively combat the escalating wheat prices, a trend that has been consistently observed in the weekly auctions conducted by the Food Corporation of India (FCI).
Exploring Options to Stabilize Wheat Prices
In its quest to tackle the surge in wheat prices, the government is carefully examining various options to stabilize the market. Key among these deliberations is the adjustment of the stock limit and the import duty on wheat. While specific timelines for implementing these measures have not been disclosed, authorities are cognizant of the persistent increase in the average selling price observed in the FCI’s weekly auctions.
Wheat Stock Limits and Declarations by Traders and Processors
Recent notifications have established stock limits for different stakeholders in the wheat market in India. Retail outlets, including major chains, are permitted to stock up to 10 Tonnes, while traders and wholesalers have a limit of 3k Tonnes. Processors, responsible for producing flour and other flour products such as sooji and maida, are subject to a limit determined by either 75%of their mills’ annual installed capacity or 10 months’ worth of actual requirements, based on monthly capacity within the period of June 2023 to March 2024.
Authorities have received declarations from traders, reporting that they possess 2.9 Million Tonnes of wheat, while processors claim to hold 6.2 Million Tonnes, bringing the total to 9.1 Million Tonnes as of July 31. Accounting for consumption, seed, feed, and additional stock held by processors and stockists, officials estimate the available wheat supply to be in the range of 42-48 Million Tonnes throughout the year. However, uncertainties surround the release of stock that falls outside the radar of the stock limit regulations.
Rising Retail Prices Amidst Record Wheat Production
Amidst record wheat production estimated at 112.74 Million Tonnes for the year 2022-23, retail prices of wheat and flour have experienced a notable upward trend. According to data from the Consumer Affairs Ministry, wheat prices have surged from $0,42/kg in April to $0,43/kg in August. Similarly, flour rates have risen from $0,49/kg in April to $0,50/kg in August.
In recent auctions, the weighted average selling price of FAQ (Fair and Average Quality) wheat reached $0,31/kg, up from $0,30 in the previous week, with a reserve price of $0,29/kg. For URS (Under Reduced Specification) wheat, the weighted average selling price increased to $0,31 from $0,30 in the previous round, with a reserve price of $0,29/kg. The highest price recorded in the August 2 FCI auction was $0,35/kg in West Bengal and Maharashtra.
Considering the current situation, uptrend can be seen in shorter period. It is recommended to procure wheat once the market is stabilized.