Centre imposes stock limits on quantity of wheat to cool down prices

Move comes despite agriculture ministry estimating a record production of the cereal grain this year

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For the first time in nearly 15 years, the central government in a sudden move on Monday imposed limits on the quantity of wheat that traders, wholesalers, big-chain retailers, and processors can hold until March 31, 2024.

This stock limits clamped on arhar/tur (pigeon pea) and urad (black gram) earlier this month. The stock limits came despite the country expecting a bumper wheat harvest of over 112 million tonnes (mt) in the 2022-23 crop marketing season that will get over later this month (July-June). 

Farmers have been kept outside the purview of the limits.

The decision to impose stock limits came on a day when retail inflation declined to a 25-month low of 4.25 per cent in May, mainly on account of softening prices of food and fuel items.

But with the possibility of monsoon playing truant and elections lined up in major states in the months ahead culminating with the general elections in 2024, the Centre, it seems, does not want to tinker with food inflation just yet.

It had, a few weeks ago, imposed stock limits on a few pulses and ruled out an extension of the sugar export quota.

The official order on wheat, meanwhile, stated that the stock limits on the commodity would come into force a month later to give stakeholders time to raise their inventories to the desired levels.

In addition, the Centre also announced its plan to liquidate 1.5 mt of wheat from its inventories with immediate effect for bulk consumers through e-auction.

This wheat from its inventories will be sold in lots of 10 tonnes and 100 tonnes for Rs 2,125 and Rs 2150 per quintal, respectively. The economic cost of wheat for 2023-24 is Rs 2,703 per quintal. The registrations for e-auction will start on June 28.

The Food Corporation of India will also offload certain quantities of rice through the Open Market Sale Scheme at a reserve price of Rs 3,100 per quintal.

Officials said the stock limits on wheat were imposed as prices at mandis had started showing a rising pattern and rose by about 8 per cent between June 7 and May 7 (one month), according to official records.

There hasn’t been any cascading impact of the price rise in retail trade so far.

“There has been an uptick in wheat prices in the past month. There has been an increase of close to 8 per cent at the mandi level. Although wholesale and retail prices have not gone up much, the government has imposed a stock limit on wheat...” Food Secretary Sanjeev Chopra told reporters in the Capital.

He said the country has enough wheat stock but ‘unscrupulous’ elements have been hoarding, triggering an artificial price rise.

According to the limits, each wheat trader can hold stocks equivalent to 3,000 tonnes at any given point in time. Retailers can hold 10 tonnes; big-chain retailers 10 tonnes for each of their outlets and 3,000 tonnes at all their depots.

The processors of wheat, including atta, sooji, and maida makers, can hold the wheat equivalent of 75 per cent of their annual installed capacity or quantity equivalent of monthly installed capacity multiplied by the remaining months of 2023-24, or whichever is less.

“This move by the government has been by and large welcomed because widespread wheat hoarding was taking place. Now, prices are bound to fall with this move. The good thing is that official notification has included atta, sooji, and maida makers (processors of wheat), ensuring product prices don’t flare up,” says Rahul Chauhan, commodity analyst at iGrain India.

Cap on sugar exports until first half of CY24

The government is not considering allowing sugar exports until at least the first half of the next season, as it is worried the El Nino weather pat–tern could reduce rainfall and dent production, government sources said on Monday. The Centre decides the amount of the sweet–ener mills can export before the start of the new marketing year on October 1. The delay in shipments could support global sugar prices trading near multi-year highs.  (Reuters)