FCI’s Bold Move: Targets Sale of 1.5 MT Wheat and 1 MT Rice in Open Market
The Food Corporation of India (FCI) conducted its second weekly electronic auction for the open market sale scheme (OMSS), offering 0.4 million tonnes (MT) of wheat. The auction received bids from approximately 1340 bulk buyers, including flour millers and food companies, for 0.12 MT of wheat. While the response was not as high as expected, it indicates some level of demand for the commodity.
In contrast, the first e-auction for the sale of 0.38 MT of rice received a lukewarm response, with only five bidders offering to purchase a total of 170 tonnes of grain. This suggests a relatively lower demand for rice compared to wheat in the current market.
These auctions serve as a means for the FCI to sell surplus food grains and maintain market stability by ensuring supply meets demand. The response to these auctions provides insights into the demand dynamics for wheat and rice in the open market.
During the second weekly electronic auction, the average bid for fair and average-quality wheat was Rs 2,137 per quintal, slightly above the reserve price of Rs 2,130 per quintal. This indicates that buyers were willing to pay a slightly higher price for the commodity. The Minimum Support Price (MSP) for wheat in the current season is set at Rs 2,125 per quintal.
Under the open market sale scheme (OMSS), the government has planned to sell 1.5 million tonnes of wheat from the central pool to various buyers, including flour millers, private traders, bulk buyers, and manufacturers of wheat products, until March 2024. This initiative aims to control prices and ensure the availability of wheat in the market.
In the first weekly e-auction of wheat held earlier, only 89,000 tonnes of wheat could be sold out of the 0.4 million tonnes offered. However, with the government regularly selling wheat in the market, it is expected that prices will further stabilize and moderate in the coming weeks, according to traders and experts.
During the e-auction for rice, the bidding price was marginally higher than the reserve price. The reserve price for rice was set at Rs 3,173 per quintal, and the bidding price reached Rs 3,175.35 per quintal. However, the response to the open market sale of rice by the Food Corporation of India (FCI) has historically been limited, as traders and bulk buyers have been hesitant due to the abundant and diversified production of rice across the country.
A food ministry official stated that the FCI will continue to sell food grains from its surplus stocks until the inflationary trend in cereal prices is curbed. The official added that the current grain stocks are above the buffer level and are sufficient to carry out open market sales. It is worth noting that the FCI has traditionally sold surplus wheat to bulk buyers during the lean season (January-March) as part of its previous policy.
As of July 1, the Food Corporation of India (FCI) has a wheat stock of 30.09 million tonnes (MT), while the government’s annual requirement for the implementation of the National Food Security Act (NFSA) is 18.4 MT. The buffer for wheat on July 1 is 27.58 MT, indicating sufficient stock for the immediate needs.
Regarding rice, the FCI has a stock of 25.92 MT, excluding 15.84 MT of rice yet to be received from millers at the beginning of this month. The buffer for rice is 13.54 MT. The annual requirement of rice for allocation under the NFSA is 36 MT.
The new procurement season for paddy, which is used to produce rice, begins on October 1, indicating that the FCI will start procuring new rice stocks for the upcoming year 2023-24.
To control the domestic prices of wheat, the government is exploring various options, including the possibility of reducing the import duty on wheat. Currently, the import duty on wheat stands at 40%. By considering a reduction in import duty, the government aims to stabilize prices and ensure an adequate supply of wheat in the domestic market.
Inflation in retail wheat prices saw a moderate increase of 12.61% in May, compared to 15.46% in the previous month. Similarly, the inflation rate for rice witnessed a slight decline to 11.33% in May. To curb the rise in prices, the government recently imposed stock-holding limits on wheat for traders, wholesalers, and retailers until March 31, 2024. These measures aim to regulate the market and prevent hoarding, ensuring the availability of essential commodities at reasonable prices.
