Centre likely to distribute more rice than wheat to manage stock

The central government may have to distribute more rice than wheat in the latest extension of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) announced on Saturday for six months starting April 1 to prevent a drawdown in its wheat stocks at the end of 2022-23 (FY23), said trade and grain industry sources.
 

The official statement released on Saturday said the government plans to allocate 24.4 million tonnes (mt) of wheat and rice for PMGKAY for the next six months starting April 1. It did not offer a break-up of rice and wheat in it.
 

Wheat stocks at the end of the next fiscal year, say several market watchers, could get impacted if procurement is below the targeted 44.4 mt for FY23 due to strong demand from private traders to export Indian wheat.
 

There is no such problem when it comes to rice. India has ample stocks in its warehouses and there is no sudden spike in private demand.
 

Decoding the mathematics, a leading trader from a global commodities firm says assuming wheat’s closing stock in 2021-22 is around 19.5-20 mt as on March 31, 2022. Although lowest in three years — it will still be significantly higher than the normative inventory of 7.5 mt required for maintaining buffer and strategic reserves.
 

Now, on top of this, if the procurement is around 34-35 mt, against the target of 44.4 mt, it will mean that available wheat supplies this year will be around 55 mt.
 

Of this, around 24-25 mt will go towards normal public distribution system requirements, while sales through open-market schemes and other avenues could be 7-8 mt.
 

“Open-market offtake will be good this time because the price at which the government is selling is lower than the prevalent market price,” says a wheat trader.
 

Now, if distribution through PMGKAY is around 6-7 mt in the next six months, it will mean that the closing stocks of wheat on March 31, 2023, could be around 15 mt, he adds. This, he says, will be again lower than this year’s, but nearly double the required quantity.
 

But the situation could get complex if wheat procurement in FY23 drops by a sharper-than-projected 8-9 mt, which will mean that the closing stocks will fall further in FY23.
 

“If this happens, the government might even look to curb exports,” says a trader quoted earlier. The next few months will clarify which of the scenarios play out.
 

On the production front, India’s wheat harvest is projected to be a record 111-mt-plus of wheat in FY23 (April-March), which is almost 2 mt more than this year’s.