Govt's 3.6 mt grain sale may bring down food inflation

Domestic food inflation hit a decade high of 18.65 per cent in the week ended December 12.

The government may sell 3.6 million tonne (mt) grain in the open market during the next quarter to check inflationary trends in food items. This would comprise 2.85 mt wheat and 737,344 tonnes of rice.

The government, through Food Corporation of India (FCI), had earmarked 1.5 mt of wheat and 500,000 tonnes of rice for open market sale in the October-December period. Similar quantities have been approved for the January-March quarter.

In the current quarter, however, FCI was able to sell only 147,949 tonnes of wheat and 262,656 tonnes of rice primarily due to the delay in announcement of scheme and high prices for the bulk buyers of wheat. Consequently, around 1.35 mt wheat and 237,344 tonnes rice is being carried over to the next quarter. This, together with the next quarter’s quota will ensure availability of 2.85 mt wheat and 737,344 tonnes rice for the January-March period.

Domestic food prices hit a decade high of 18.65 per cent in the week ended December 12 due to demand-supply mismatch and worst monsoon rain in 37 years that affected the kharif crop output. Rising food prices have contributed to a faster-than-expected 4.78 per cent surge in the wholesale price index during November.

“While the majority of demand for wheat has been from states such as Rajasthan, Himachal Pradesh (HP), J&K, Tamil Nadu (TN), Andhra Pradesh, Madhya Pradesh and Gujarat, the demand for rice is from HP, TN, Andhra and Karnataka,” a FCI official said.

The reserve price of 1 mt wheat meant for the bulk buyers (during the two quarters) such as flour millers had been reduced by around Rs 185 a quintal with effect from December 24 after a decision by the Empowered Group of Ministers on food. Post this reduction, the price is in the range of Rs 1,240 a quintal (for Chandigarh, Punjab and Haryana) to Rs 1,640 (for Port Blair).

However, the price of 2 mt wheat for retail sale has been kept lower in the range of Rs 1,100 a quintal (Chandigarh, Punjab and Haryana) to Rs 1,500 (Port Blair). State government agencies can procure this wheat from FCI and market it to retail consumers at a margin not exceeding Rs 2 a kg.

The price of rice, only meant for retail sale, is Rs 1,495 a quintal for common grade and Rs 1,540 a quintal for Grade A variety across all states. While this sale may not necessarily impact the open market prices, it will certainly improve the availability.