New Delhi: The government’s war on inflation may have just got tougher. According to sources at the food ministry who did not wish to be identified, wheat stocks with the Food Corporation of India (FCI) were 5.7 million tonnes on 1 January, far below the recommended 8.2 million tonnes. The number fell to 5.38 million tonnes on 1 February. “We are treading a very thin margin. We will be able to moderate inflation only if the weather remains favourable and we have a bumper crop this year,” said T. Haque, chairman of the Commission for Agricultural Costs and Prices. The wholesale inflation for wheat, for the week ended 27 January, was 11.74%.
The government released 3,50,000 tonnes of wheat at prices below the market rate to various states on Tuesday, but will likely run short of the 1.5 million tonnes it needs every month to pump into its public distribution system and special food programmes for the poor. That could explain the government’s urgency to procure 15 million tonnes of wheat this year.
Last year, the FCI procured only 9.2 million tonnes (it did 14.8 million tonnes in 2005), and was eventually forced to import 5.5 million tonnes.
This year, it has already banned exports of wheat on 9 February, is monitoring the production of wheat through a special cell in the agriculture ministry, and has set up a committee headed by the food secretary to take a call on the procurement price by the first week of March.
The government has already said it will pay at least Rs750 a quintal (100kg) this year as compared with Rs650 in 2006. This figure could go up. “The government’s uncertain and unpredictable policy is a major threat to our trade,” said a big trader in wheat who did not wish to be identified. “In a panic to procure wheat, they can do anything.”
Last year, private traders had to pay as much as Rs830 per quintal to buy wheat in Punjab, a major wheat-producing state.
A worried private trader said that last year the government had imposed limits on the quantity of wheat traders could buy and that it could restrict the movement of wagons used by them this year.
According to a report in The Hindu, the government has asked large private traders to keep the country’s precarious buffer stock situation in mind when they buy wheat from the farmers.
Already wheat prices in the spot market are at Rs1,055 a quintal while the future price (for March delivery) on the national commodities and derivatives exchange fell to Rs947 on Friday. “There are rumours about the government banning wheat futures so this has led to a fall in buying interest,” said Rajni Panicker, a wheat analyst at Man Financial.