Govt plans to make wheat cheaper for bulk buyers

After its plan to offload foodgrain from state warehouses saw lukewarm response, the government plans to lower the price of wheat sold to bulk consumers and flour mills. The move would help liquidate wheat stored in state warehouses, ahead of the new procurement season, starting April 1.

Officials said of the allocated 6.5 million tonnes (mt), so far, the government had managed to sell about 1.5 mt in the domestic market. They added the food ministry was considering absorbing the taxes and duties levied by states on wheat purchased by the Food Corporation of India. “There was another proposal to reduce the price by Rs 100-115 a quintal to about Rs 1,170 a quintal. But it might not be considered,” said an official.

Earlier, the government had decided to sell 6.5 mt of wheat from its warehouses at a price equivalent to the sum of the minimum support price (MSP), local taxes and duties and freight in non-producing states. Bulk consumers found the price unattractive, as it was higher by Rs 200 a quintal. For wheat producing states such as Punjab and Haryana, taxes were included, while freight wasn’t considered.

LOWERING PRICES Major states imposing levies on wheat as percentage of MSP in 2012-13 marketing season (in Rs  per quintal). MSP for the season is Rs 1,285 a quintal
Region	Total  levies	Price after tax   at mandis
Punjab	14.5	1,471
Haryana	11.5	1,433
Uttar Pradesh	9.0	1-Nov
Uttarakhand	9.0	1-Nov
Jharkhand	7.5	1,381
Bihar	6.5	1,369
Madhya Pradesh*	4.7	1,345
Gujarat	3.5	1,330
*In Madhya Pradesh, the price after tax has been calculated at Rs 1,285 per quintal, excluding the Rs 100 per quintal bonus announced by the state government; MSP is minimum support price                                   Source: Food Corporation of India

On the impact of the taxes and levies imposed by major producers such as Punjab and Haryana, a trader said because of these taxes, wheat was sold at Rs 1,514-1,550 a quintal, while the MSP was Rs 1,285 a quintal.

“The price would vary from state to state, depending on the tax and levy structure of the region where the wheat has been procured, as state governments are reluctant to lower the tax on foodgrains,” traders said. Experts fear unless the government manages to liquidate wheat inventories through domestic sales and exports, foodgrain stocks in the country would rise to 100 mt by June 1. As of December, grain stocks were estimated at 68.3 mt. Wheat stocks accounted for about 70 per cent of this.