With surplus wheat stocks and in anticipation of a record crop, the offtake under the open market sale scheme (OMSS) floated by the government through the Food Corporation of India (FCI) for bulk consumers has slowed down over the last one year.
Against an allocation of 2 million tonnes of wheat to bulk consumers such as flour millers and food companies, the FCI has managed to sale only 1.34 million tonne during 2010-11 in the open market.
Meanwhile the OMSS has been extended for 2011-12.
The scheme was launched in 2008-9 to sell excess wheat stocks in the open market though it has largely been unable to attract a large number of buyers because of the high price compared with the market price. According to a wheat trader, while the high level committee (HLC) under the food ministry has fixed R1,252 per quintal for the wheat allocated under OMSS in Delhi, the current market price is around Rs 1,185 per quintal.
?The government needs to reduce the OMSS wheat price for making it attractive for the private bulk purchasers,? a Ghaziabad-based wheat flour millers said.
?Total offtake of wheat had been lower than allocated quantity under OMSS during last fiscal and we are working out a proper pricing formula for attracting more buyers under OMSS,? a food ministry official told FE.
At present, the FCI has huge wheat stocks of more than 15 million tonnes, which is far above strategic reserve and buffer stocks norms. The country is expecting to harvest a record wheat crop of more than 84 million tonnes during next few weeks. With the acute storage crunch faced by the FCI and state government agencies, the government had been trying to sell part of the excess stocks through OMSS.
In a bid to cut down on the cost involving physical tendering, the FCI has been using National Spot Exchange Limited platform to sell wheat under OMSS to bulk buyers. According to an FCI official, e-auctioning, besides reducing transaction cost, also ensures quick settlement of payment and delivery, leading in turn to better price discovery.
Moreover, in a move to allow more time to traders to lift allocated wheat under OMSS, the FCI recently modified the guidelines by allowing buyers seven working days instead of seven days (including holidays) after the acceptance of tenders to take delivery of stocks. ?Earlier, because of public holidays, traders had to pay holding charges in case of failure to take delivery with seven days,? an FCI official said.
The FCI last year had allowed small traders to lift wheat (3 to 9 tonnes per day per depot) directly from FCI godowns without going through tendering process under OMSS.
