An Overview of the Wheat Market
The Indian government has unveiled the Open Market Sale Scheme (OMSS) policy for wheat. Understanding this policy is crucial for exporters to effectively manage market fluctuations. This policy aims to balance domestic needs while opening opportunities for surplus exports. Under the new OMSS policy, the reserve price of wheat is fixed. This time, transport costs will be added to the reserve price, unlike last year’s uniform rate across the country. This adjustment addresses industry demands and aims to create a fairer pricing mechanism.
Policy Implementation
The Food Corporation of India (FCI) will decide the quantity of stocks to be offloaded and the timing of e-auctions. These decisions will be made in consultation with the Ministry of Food. Only surplus stock beyond the combined requirements for the National Food Security law and other welfare schemes will be released. This ensures that buffer norms are maintained while releasing an additional 2 million tonnes (mt) of wheat. As of July 1, 2024, the FCI holds 28.26 mt of wheat and 48.5 mt of rice in the Central Pool stock. The annual requirement for wheat under public distribution and other schemes is about 18.4 mt. With a buffer norm of 7.46 mt, the government has a surplus quantity available for OMSS.
Industry Reactions
This announcement is a positive development for millers and traders. An expert from IGrain India noted that adding freight costs was a long-standing industry demand. Last year, the uniform rate across the country led to a record sale of 10 mt of wheat under OMSS, primarily benefiting southern millers purchasing directly from FCI. Despite the benefits, some experts question the removal of the “One Nation, One Rate” policy, which was previously touted as a significant achievement. The government has not clearly explained the rationale behind this change.
The new OMSS policy offers strategic opportunities for exporters. The inclusion of transport costs addresses regional disparities, potentially leading to more equitable market conditions. Exporters can use the surplus stocks and favorable pricing to enhance their market presence. However, it is essential to stay informed about policy adjustments and government approvals to maximize benefits