Decision on open market sale of wheat today

The Committee of Secretaries (CoS) is scheduled to meet tomorrow to decide on the issue of selling wheat in the open market.

The sale is expected to cool prices of the commodity in the festival season and help control the inflationary surge in several food items usually witnessed during the season.

The wholesale price index (WPI)-based inflation for the week ended August 16 stood at 12.40 per cent. Wheat has a weight of 1.38 per cent in the index.

The Cabinet Committee on Economic Affairs (CCEA) had approved the open market sale on August 21 while leaving the decision on quantity and timing of sale to the CoS. Sources indicated that the sale of wheat is likely to begin within a couple of weeks.

“The Department of Food and Public Distribution will direct the Food Corporation of India (FCI) to sell wheat based on the recommendations of the CoS,” said a source.

The FCI will fix the sale price for state governments, who in turn will sell wheat to retail consumers. This price would not be lower than the minimum support price of wheat — Rs 1,000 a quintal — plus cost of rail transportation from Ludhiana, the main wheat stocking point in the country, to state capitals.

Bulk consumers like flour mills and bakeries will be supplied wheat by the FCI through a process of open tendering at specific locations. The FCI again will be the final authority for deciding the price of such tenders with the rider that the price would not be lower than the price to retail buyers.

The sale will be done after meeting the requirements of the buffer and strategic stock. The buffer norm requirement for wheat as on April 1 is 4 million tonne (mt) and creation of a 3-mt strategic stock is also proposed. The central pool had a wheat stock of 24.38 mt as on August 1.

There has been a record procurement of 22.5 mt wheat during the current rabi marketing season, nearly double the last year’s purchase. The open market prices of the commodity have remained relatively stable during last one year and they continue to remain so at around Rs 1,100 a quintal (in Delhi).

However, due to the record procurement by government agencies, there is a possibility of wheat shortage in the market that could drive up prices in the open market towards the end of the calendar year.