In a desperate move, the government has extended the wheat procurement season by a month in Punjab, Haryana and Rajasthan to try and reduce a 31% shortfall in wheat procurement, estimated at a shade under five million tonnes (mt).
Wheat procurement in Punjab and Haryana, which together account for 90% of the wheat acquired by the government, was to come to an end on Wednesday. Total wheat procurement as on Monday, the latest date for which data was available, was 10.42mt compared with the target of 15mt. “With the extension of the procurement season, we are confident of acquiring another one million tonnes,” said a senior government official, who did not wish to be identified. Even then, the government will miss this year’s target by a little more than 3mt.
The shortfall in procurement could have an inflationary fall out, especially at a time when food price inflation, measured by the wholesale price index, ruled at 10.57% as on 12 May, compared with the overall inflation rate of 5.27%.
Alok Sinha, chairman and managing director, Food Corporation of India, the official procurement agency, said a shortfall in procurement was no cause for panic as the government intends to import foodgrain.
The announcement of a Rs100 increase in the minimum support price (MSP) to Rs750 per quintal, along with an incentive bonus of Rs100 per quintal, was expected to help FCI procure sufficient quantities of foodgrain. However, it has failed to enthuse farmers to turn over their crop to the government.
The government has already made public its intention to import up to 5mt of wheat. “We are hoping to import one million tonne of wheat by June end,” said a senior official at the food ministry, who did not wish to be identified.
He also suggested that with international prices of wheat at Rs1,100-1,200 a quintal, the domestic price of wheat procured in Punjab and transported to southern India also works out to the same with taxes, handling charges and transportation costs.
However, initial efforts to import have not elicited a good response. Several firms quoted $270 (about Rs10,800) a tonne to a tender floated by the State Trading Corp. “We have been advised not to make any purchases till the government approves it. In wheat, we go strictly by government’s advice,” an STC official said on condition of anonymity.
He added STC could negotiate a deal of $263 a tonne but that was not for the entire 1mt.
According to Sanjay Kaul, director, NCDEX Institute of Commodity Markets and Research, the government probably will go for about 0.5mt imports now and add more as global prices of wheat soften.
Currently, wheat is selling overseas at $250-260 a tonne. More wheat is expected to hit the market in July and August and Australian wheat will come only by November. The world production this year is estimated at 615mt against 595mt last year, so experts expect prices to soften.
Kaul says the government could have avoided a procurement shortfall by inviting tenders in Uttar Pradesh’s open market, which has one-third of the country’s wheat production. On an average, FCI procures only 2% of its stocks from the state. “The government could have floated a tender for direct delivery of wheat to FCI’s storage points. If the government can invite tenders for import why can’t it do that in domestic markets?” he asked. As on Monday, 936,000 tonnes of wheat arrived in the UP markets, but FCI could procure only 2.96 lakh tonnes.
A senior Planning Commission official, who also didn’t want his named used, supported Kaul’s argument. “International prices of wheat fluctuate and a country with over one billion population cannot depend on imports,” he said.
The government is also streamlining offtake of foodgrain from the public distribution system. “We have told the state government that wheat distributed to them this year will be on the basis of last three years average. However, this will apply only to the above poverty line (APL) category,” said a senior food ministry official. The Centre last month also asked all state chief secretaries for steps to check leakages in PDS and keep the food ministry informed. “Some states have started responding,” he added.