Govt trims open market sale price of rice

heenagupta August 10, 2023

0 5,670 8 minutes read

Govt trims open market sale price of rice

In a recent development, the Union government of India has opted to reduce the base price of rice that is being auctioned by the Food Corporation of India (FCI) within a scheme designed for bulk purchasers, mill operators, processors, and traders. This decision comes in the wake of a subdued response witnessed across the six auctions conducted thus far.

The move to decrease the base price reflects the government’s proactive approach in addressing the challenges encountered during the auctions. With a lukewarm reception witnessed in the previous rounds of bidding, the authorities have opted for an adjustment to stimulate greater participation and interest from potential buyers within the specified categories.

The scheme’s objective is to engage various stakeholders, such as bulk buyers, millers, processors, and traders, in procuring rice through auctions facilitated by the FCI. However, the relatively tepid response received in the initial auctions prompted the government to reevaluate the pricing strategy.

By lowering the base price, the government aims to make the auctions more attractive and competitive, potentially drawing in a larger pool of participants. This step demonstrates the government’s responsiveness to market dynamics and its commitment to optimizing the effectiveness of the auction mechanism.

On July 5th, the government established a reserve price of ₹3,100 per quintal for rice as part of the open market sale scheme domestic (OMSS-D). However, this pricing decision faced limited acceptance among potential buyers due to its positioning above prevailing market rates. Consequently, the scheme encountered a lack of significant interest from prospective participants.

Govt trims open market sale price of rice | Mint

The reserve price, set at ₹3,100 per quintal, represented a benchmark rate for rice transactions within the framework of the OMSS-D. This initiative aims to facilitate the sale of rice in the open market, catering to domestic bulk buyers, mill operators, processors, and traders. Despite its intent to promote sales, the reserve price was viewed as less aligned with market dynamics, which subsequently hampered robust participation.

The relatively subdued response to the scheme underlines the importance of pricing strategies that resonate with current market conditions. This situation prompted the government to reassess and subsequently lower the base price, aiming to enhance the scheme’s attractiveness and efficacy in subsequent auctions.

In the most recent auction, buyers demonstrated limited interest by acquiring merely 1,500 tonnes of rice. This followed a series of previous auctions where a total of 495 tonnes were procured. In response to this subdued response, the government has chosen to reduce the base price by ₹200 per quintal. This adjustment in pricing strategy is a proactive measure to reinvigorate participation and engagement within the auction process.

The decision to lower the base price is indicative of the government’s responsiveness to market dynamics and its commitment to optimizing the effectiveness of the open market sale scheme domestic (OMSS-D). With the revised reserve price slated to take effect in the upcoming auction, the authorities aim to stimulate greater interest among potential buyers, including bulk purchasers, mill operators, processors, and traders.

This development underscores the significance of aligning pricing structures with the prevailing market conditions to attract more robust participation. By making these adjustments, the government aims to enhance the scheme’s appeal and encourage greater engagement from relevant stakeholders.

For the most recent updates and thorough insights regarding this development, it is recommended to consult reputable news sources, official governmental announcements, and expert analyses.

Rice to get costlier as weather, India's farm perks threaten supply | The Financial Express

“Keeping in view the experience of the past five e-auctions for rice by FCI, it has been decided that the reserve price will be brought down by ₹200 a quintal and the effective price now will be ₹2900 per quintal,” Union food and public distribution secretary Sanjeev Chopra told reporters. “The cost on account of reduction in the reserve price will be borne from the Price Stabilization Fund (PSF) maintained by the Department of Consumer Affairs,” he added. FCI’s rice has about 25% broken grain and was costlier than the market price of ₹28-29 a kg, which made it unattractive for traders. The government on Wednesday also decided that FCI will offload 5 million tonnes (mt) of wheat and 2.5 mt of rice in a phased manner under OMSS. This is in addition to previous plans to auction 1.5 mt wheat and 500,000 tonnes rice.

Responding to the lackluster response observed in the previous five e-auctions for rice conducted by the Food Corporation of India (FCI), Union food and public distribution secretary Sanjeev Chopra has revealed that the reserve price will be reduced by ₹200 per quintal. Consequently, the revised effective price for rice will be ₹2,900 per quintal.

Chopra noted that this decision has been influenced by the outcomes of the previous auctions and aims to reinvigorate interest among potential buyers. The cost associated with this reduction in the reserve price will be covered by the Price Stabilization Fund (PSF), which is maintained by the Department of Consumer Affairs.

The rice supplied by FCI comprises approximately 25% broken grains and was previously priced higher than the prevailing market rates of ₹28-29 per kilogram. This pricing misalignment made it less appealing for traders and participants in the auctions.

In addition to the pricing adjustment, the government has taken further steps to optimize the effectiveness of the open market sale scheme domestic (OMSS-D). It has been decided that FCI will gradually release 5 million tonnes of wheat and 2.5 million tonnes of rice through OMSS. This expanded initiative supplements the previously planned auction of 1.5 million tonnes of wheat and 500,000 tonnes of rice.

These strategic decisions reflect the government’s commitment to refining its market interventions to better align with industry dynamics and encourage greater participation from relevant stakeholders.

For the most current and comprehensive understanding of these developments, it is recommended to consult reputable news sources, official governmental releases, and expert analyses.

FCI has so far sold 821,000 tonnes of wheat in seven e-auctions since 28 June. Average bid price for wheat under OMSS on Wednesday was ₹2,254.71 a quintal against the reserve price of ₹2,129.17. In the case of rice, the average bid price was ₹3,163.53 per quintal against the reserve price of ₹3,162.03.

The auctions aim to signal to the market that the government has sufficient has foodgrains stock, which will be used to bring down prices, the food secretary had said on 10 July. Wheat prices have gone up by 6.77% in the retail market and 7.37% in the wholesale market in the past one year. Similarly, rice prices have shot up by 10.63% in the retail market and 11.12% in the wholesale market during the same period.

Since June 28th, the Food Corporation of India (FCI) has successfully sold a total of 821,000 tonnes of wheat through seven e-auctions. In these auctions, the average bid price for wheat under the open market sale scheme (OMSS) reached ₹2,254.71 per quintal. This surpasses the reserve price of ₹2,129.17 set for wheat. Additionally, for rice, the average bid price stood at ₹3,163.53 per quintal, slightly above the reserve price of ₹3,162.03.

The primary goal of these auctions is to convey to the market that the government possesses ample foodgrain stocks, which can be deployed to mitigate price fluctuations. This announcement was originally made by the food secretary on July 10th.

The retail prices of wheat have surged by 6.77% over the past year, while wholesale prices have risen by 7.37% during the same period. Similarly, rice prices have experienced an increase of 10.63% in the retail market and 11.12% in the wholesale market over the span of one year.

Wheat, rice prices showing declining trend: Govt | The Financial Express

These developments signify the government’s proactive approach to market signaling and supply management. By leveraging the foodgrain stocks available through FCI, the government aims to stabilize prices and ensure a more predictable environment for market participants and consumers.

For the latest insights and comprehensive understanding of these dynamics, consulting reliable news sources, official government statements, and expert analyses is recommended.

Retail inflation in rice in June climbed to 11.8% from 11.5% in May and 3.2% a year earlier. The staple grain has a weightage of 4.7% out of cereals and products basket’s 9.7% in the Consumer Price Index. “In view of the benefit of over 140 crore citizens, the Union government has taken this decision to offer wheat and rice under OMSS(D) to private parties for increasing availability, moderate the rise in market prices and control food inflation. However, it is relevant to mention that the government is also providing food grains to National Food Security Act beneficiaries as per their entitlement free of cost as committed under Pradhan Mantri Garib Kalyan Anna Yojna (PM-GKAY) w.e.f. 1 January 2023,” an official statement said.

In June, retail inflation for rice escalated to 11.8%, marking a slight increase from 11.5% in May and a significant rise from 3.2% recorded a year earlier. This staple grain holds a weightage of 4.7% within the cereals and products category, which constitutes 9.7% of the Consumer Price Index.

To address the well-being of over 140 crore citizens, the Union government has made the decision to extend wheat and rice offerings under the open market sale scheme domestic (OMSS-D) to private