A Detailed Examination of the Tepid Response to the 2023 E-Auction of Rice and Wheat

A Detailed Examination of the Tepid Response to the 2023 E-Auction of Rice and Wheat

Merchants who wish to participate in the Food Corporation of India’s weekly e-auctions for rice and wheat through the open market sale program should be more excited about it. This is due to the limit on the grain each bidder can purchase and the higher reserve pricing.

In response to 0.18 MT offered in its fourth weekly e-auction held following the programme, the Food Corporation of India (FCI) on Wednesday received bids for 0.1 million tonnes (MT) of wheat to be sold to bulk purchasers, including flour millers and food firms.

In the third e-auction for selling 0.37 MT of rice, the company only received lukewarm interest from bidders who offered to buy 10 tonnes of grain.

The firm has only sold 470 tonnes of rice and 0.48 MT of wheat since the start of the month.

According to sources who spoke to FE, the average bid for fair and middle-grade wheat was Rs. 2,163.66 per quintal, slightly more than the reserve price of Rs. 2,150 per quintal. The current season’s minimum support price (MSP) for wheat is Rs 2,125 per quintal.

This week, the open market sale scheme’s average bid price for quintals of rice was Rs 3,100, equal to the reserve price.

According to an official statement, the ongoing e-auctions aim to lower the retail price of wheat by offering up to 100 tonnes per buyer.

The 100-tonne restriction per buyer per region is a minor amount, according to a representative of a significant private firm that deals with wheat goods, for those who wish to buy in bulk.

In the instance of rice, according to numerous traders FE talked with, the benchmark price of Rs 3100/quintal for the e-auction set by the FCI is more than comparable varieties of grain offered on the market.

According to the FCI, a buyer can now bid a maximum of 1,000 tonnes per region, up from the previous limit of 100 tonnes.

The official claimed that the present grain supplies are sufficient for open market sales and are over the buffer. Wheat and rice had retail inflation in June of 11.78% and 12.37%, respectively. According to the government, the programme would continue until the price of cereals begins to drop.

Except for the 14.7 MT of rice still owed to millers, the firm now holds 25.23 MT of rice. The rice supply is below the July 1 buffer of 13.54 MT. To be distributed under the NFSA, 36 MT of rice is required yearly.

The next paddy procurement season (2023–24) begins October 1.

According to a representative of the food ministry, the FCI would keep selling foodgrains from its surplus supplies until the inflationary trend in cereal prices is stopped. The official claimed that the present grain supplies are sufficient for open market sales and are over the buffer.

Following the previous policy, the organization has sold surplus wheat to large purchasers from January through March.

Through weekly auctions, it sold 3.37 MT of wheat between February 1 and March 15, according to the plan. The open market sales of the FCI were 2.5 MT in 2020–21 and 7 MT in 2021–22.

The selling of rice via an online auction has gotten negative feedback in the last few years.Officials stated that to regulate local prices, and the government is considering several measures, including lowering the 40% import charge now applied to wheat.

Last month, the government set stock-holding restrictions on wheat for the first time since 2008 for dealers, wholesalers, and retailers until March 31, 2024, to rein in price increases.

The rise of digital technology has revolutionized every sector of the global economy, including agriculture. Electronic auctions, or e-auctions, have become integral to trading agricultural commodities like rice and wheat. Despite the promising prospects of such platforms, the 2023 e-auction of rice and wheat has received an unexpectedly lukewarm response. This article aims to thoroughly examine the lacklustre reaction and delve into the root causes.

E-auctions, the process of selling or buying goods or services through an electronic medium, primarily via the Internet, have been gaining popularity due to their convenience and global reach. The e-auction platform for agricultural products allows farmers, buyers, and traders to interact directly, eliminating intermediaries and providing a level playing field. While e-auctions offer multiple advantages, such as real-time bidding, broader market access, transparency, and fair prices, they also present new challenges.

In 2023, the e-auction of two major agricultural commodities, rice and wheat, witnessed a significant downturn in participation. Despite the growing trend of digitalization and the promise of greater transparency and profitability through e-auctions, participation in these auctions needed to be more consistent. The reasons for this tepid response are multifaceted and involve a combination of technological, socio-economic, and market-based factors.

Despite the widespread penetration of the Internet, the reality remains that not all potential participants in these auctions are digitally literate or have reliable Internet access. Many small-scale farmers, particularly those in developing countries, need more digital skills to engage in e-auctions. Connectivity issues and frequent power outages in rural areas further complicate participation. These technological hurdles can discourage farmers from using the platform, contributing to the tepid response.

E-auctions also pose a unique set of socio-economic challenges. Many smallholder farmers are uncomfortable digitally transacting large sums of money, fearing online fraud or theft. In developing nations, a lack of trust in digital platforms is often fueled by low literacy levels and inadequate knowledge about digital safety. The reluctance to shift from traditional physical auctions to e-auctions could be attributed to these ingrained socio-cultural factors.

The market dynamics during the 2023 auction could also significantly contribute to the lacklustre response. The year witnessed unpredictable weather patterns affecting the yield, alongside global trade disruptions caused by geopolitical tensions and continuing recovery from the COVID-19 pandemic. These market uncertainties discouraged active participation.

Another contributing factor could be the pricing of commodities. Suppose the minimum support prices (MSPs) offered at the e-auctions were not competitive. In that case, farmers might have preferred local markets or private traders, further diminishing the appeal of the e-auctions.

Addressing these challenges requires a comprehensive approach. Enhancing digital literacy and infrastructure in rural areas is paramount. Governments, NGOs, and private sectors can collaborate to deliver targeted digital education and improve internet connectivity. Trust-building measures, such as promoting secure digital transaction practices and strengthening legal recourse against digital fraud, could encourage participation.

Market-based issues require timely intervention from policy-makers. Adjusting MSPs to reflect current market realities and considering farmers’ production costs could incentivize participation. Moreover, strengthening international trade ties and improving market predictability can assure participants of stable and profitable transactions.

The 2023 e-auction of rice and wheat has brought to the forefront some critical challenges of digitizing agricultural trade. While the response may have been tepid, it provides valuable insights into the problems faced by stakeholders and the steps needed to make such platforms more inclusive and effective. A multi-pronged approach that addresses technological, socio-economic, and market-based factors can help leverage the full potential of e-auctions in the future.