India Has Purchased 20.5 Million Tonnes Of Wheat

New Delhi: India has purchased 20.5 million tonnes of wheat in 2008 from local farmers and is within sight of a record wheat buffer stock this year, the chairman of Food Corp of India, Alok Sinha, told Reuters on Thursday.

A likely record crop of 76.78 million tonnes in 2008, a result of better seeds and favourable weather conditions, have helped the government build large buffer stocks at a time it is battling inflation ruling at 3-½ year highs.

"In all likelihood, we will cross our previous record tomorrow. We expect to buy a total of 21.5 million tonnes wheat this year." he said.

Food Corp of India is the country's main grain procurement agency.

Depleted buffer stocks forced India to order expensive imports of 7.3 million tonnes over the last two years, and tenders floated by the world's second-biggest consumer helped global prices soar.

Wheat Prices May Start Going Up

Chennai: Wheat prices may tend to gain once the current year’s arrivals get over. However, views on the time when the prices may start going up are divided.

Currently, arrivals are flooding all over the market and, according to trade and industry sources, no shortage or problem is being witnessed in wheat compared with what happened during the corresponding period last year.

No shortage

While the Centre is busy mopping up the grain for buffer stocks in States such as Punjab and Haryana besides to some extent in Madhya Pradesh, Rajasthan and Bihar, the private trade, particularly millers, is to get adequate supply from Maharashtra and Madhya Pradesh.

“We are not witnessing any shortage in wheat. We are able to get wheat by road from Maharashtra and Madhya Pradesh to our mill in Karnataka at Rs 1,280-90 a quintal,” said Pramod Kumar, President of the Karnataka Roller Flour Mills Federation.

The ample supply of the foodgrain, especially to mills in the South, is despite the Railways’ decision on not to allocate wagons to the private trade for moving wheat.

“We are getting wheat by road transport but it is Rs 50 a quintal higher than the price at what Karnataka mills are getting,” said K.S. Kamalakannan, Convenor of Flour Mills Federation of India and President of Tamil Nadu Roller Flour Mills Association.

Prices steady

In the New Delhi market, considered a benchmark for national prices, wheat (dara) was quoted at Rs 1,070-1,120 a quintal. Prices have been ruling at this level for the last few days.

On the other hand, procurement of wheat by Central agencies for buffer stocks till Sunday has been estimated at 166 lakh tonnes (lt). Punjab alone has contributed 94 lt, while 48 lt has come from Haryana. According to the Government sources, the Centre is confident of mopping up 180 lt for buffer stocks against a target of 150 lt.

Higher support price

The Centre has been able to muster wheat more than its target mainly since the minimum support price for wheat has been hiked to Rs 1,000 a quintal this year, while higher cess and taxes in Punjab and Haryana ensure that the private trade is out of contention there in buying the grain.

“What we are witnessing is that no one is trying to hold stocks like last year. Multi-national agencies, which procured over 20 lakh tonnes last year, are also not in the markets to buy wheat. Having burnt their fingers last year by holding on stocks, farmers and traders are equally eager to offload whatever they have,” Pramod Kumar said.

Since the Centre is buying available wheat in Punjab, Haryana, Rajasthan, Madhya Pradesh and Uttar Pradesh, where the Food Corporation is offering a 2.5 per cent commission to arthiyas or commission agents, the trade and industry perceive a tight supply situation during the later part of the year.

Buying from Bihar

“We hear that the Centre has been procuring stocks from Bihar also,” industry sources said.

“But the higher procurement of wheat by the Centre could result in its prices gaining from sometime in October,” said Raj Sud, a trader in Khanna, Punjab.

Government sources, too, are of the view that the market could witness some increase in October.

“We expect prices to gain once the arrivals get over. There could be marginal rise, probably from next month itself,” Kamalakannan said.

Under pressure

Sud said if the Centre procures more, availability for flour mills, especially towards the end of the year, would be less. “With import being a remote possibility due to higher global prices, the domestic market could face pressure,” he said.

But according to industry sources, the Centre is keen to keep inflation under control and it would not want to see any rise in wheat prices.

“There is already a talk of the Centre resuming Open Market Sale Scheme. If that happens, it could keep the prices under leash,” the sources said. Arrivals are heavy this year in view of wheat production being estimated at a record 76.78 million tonnes (mt) against 75.81 mt last year.

Scrapping Of Wheat Tender: Transparency Needed

Mumbai: The tender for wheat floated by National Collateral Management Services (NCMSL) has been scrapped after four multinational suppliers responded. The decision to pass over is attributed to high strike price and high premium quoted by the tender participants.

The prices ranged between the low of $380 and high of $471 a tonne, while the premium was in the $30.0-37.5 a tonne range.

Suppliers are upset with the cancellation of the tender and may turn wary in future. In the international market, it is seen as a fishing expedition by India, something that does little to enhance the country’s image.

At this rate, India could become a laughing stock of the world, a trader remarked. It is not the first time that a tender was scrapped. It happened last year too; and subsequently the country paid a heavy price for importing wheat.

NCMSL tender

It is unclear what prompted the agency NCMSL to float the tender in the first place when procurement is going on at full swing; and what actually changed in the last three days to force the scrapping of the tender. Because the entire exercise involves public money, the Government is duty bound to ensure openness.

A good deal of secrecy seems to be shrouding the tender process, so much so that it was mentioned even STC on whose behalf the tender is sought to be floated was unaware of the developments.

Some independent observers described the whole development as a ham-handed attempt by India to stay in the market for supplies but without genuine desire to buy.

Call option route

The call option route could turn out to be wasteful exercise if actual wheat output is anywhere close to the Agriculture Ministry’s estimate of 75 million tonnes. Already, the Government has placed a number of roadblocks to prevent the private sector from buying wheat. There are formal and informal impediments.

Despite all this, if Food Corporation of India fails to reach the procurement target of 15 million tonnes, there is a reason to suspect something is seriously wrong with the Government policies and approach to procurement.

Given the current pace of arrivals and FCI purchases, it would make commercial sense to wait until mid-May to review the quantum of arrivals and procurement and then take a decision whether or not to import; and in what quantities.

If a need arises, the Government can make forward purchases for shipment in September and beyond. At least, at this point of time, forward prices are softening in the wake of considerably improved world crop prospects. A close watch on the developments in the world wheat market and within the country is necessary.

As regards India’s wheat purchase policy, a serious review at the highest level in the Government is imperative to ensure decisions are taken in a transparent manner in the best interest of the country.

It is believed that another tender will be floated early next week. What fate befalls it remains to be seen.

Import Duty Concession : Wheat

Private players have reported the import of 749,000 tonne wheat so far in the current financial year, according to the source. Despite the fact that the plant quarantine authority had originally given licences for import of over 3 million tonne wheat under OGL, actual imports have been very low due to high international prices. Of the total quantity imported under the OGL, almost all has reached Indian shores. The government had brought down the duty on wheat import under OGL to 5 per cent from 50 per cent in June to encourage private imports. In September, it further slashed the import duty on wheat to nil. The concession,which was valid till December 31 earlier, had now been extended to February 28. The official said there was a glut of wheat stocks at both Tuticorin and Chennai ports.