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Wheat prices rise as government struggles to release excess stock

The government’s inability to release excess grain stocks under the Open Market Sale Scheme for bulk buyers is pushing wheat prices up.

The government’s inability to release excess grain stocks under the Open Market Sale Scheme (OMSS) for bulk buyers is pushing wheat prices up. Food minister KV Thomas told FE that the Cabinet would soon decide on the releasing 7 million tonne of wheat from the Food Corporation of India’s (FCI?s) excess grain stocks.

In the last six months, the government has already allocated six million tonne of wheat under the OMSS. FCI, according to flour millers, is yet to start the tendering process for the OMSS wheat, which led to the scarcity in supplies.

The wholesale price of wheat in Uttar Pradesh, the biggest producer of the grain, shot up to R1,580 a quintal on Wednesday from R1,480 a quintal a month back. In Punjab and Haryana, wheat prices have crossed the R1,600-quintal mark due to high taxation regime.

According to the department of consumer affairs data, retail prices of wheat has gone up to R19 a kg from R17 a kg two months back. Prices have also started to rise in other metros.

?The prices are expected to rise further if the government does not release the excess stocks in the market,? Adi Narayan Gupta, president, Roller Flour Millers Federation of India, told FE.

Flour millers said the stocks with private players had been low because FCI and state government-owned agencies this year had purchased more than 39 mt (41% of the total output of 94mt) of wheat mostly from Punjab, Haryana and Madhya Pradesh.

The millers have been demanding additional allocation of wheat under the OMSS as the Centre had huge stocks of grains far excess of requirement.

As per the latest FCI data, the Centre has wheat stocks of 40.5 million tonne at the start of this month against the buffer norm of11 million tonne and strategic reserve of 3 million tonne.

?We have sufficient stocks to meet the domestic demand and we will gradually release wheat to bulk buyers as per the requirement,? Thomas said.

The flour millers had recently urged the government to fix a uniform price for the wheat allocated under the OMSS for bulk buyers so that sufficient quantity is available to the millers in the key growing states of Punjab and Haryana.

For wheat-consuming states in southern, eastern and western regions, the FCI had fixed rates on basis of minimum support price and freight cost from Ludhiana. For producing states such as Punjab and Haryana, OMSS wheat prices have been fixed on the basis of MSP and applicable state taxes paid by the FCI during the procurement of the grain.

?This makes wheat costlier in producing states and cheaper in the consuming states,? Naresh Ghai, president, Punjab Roller Flour Miller Association, said. Ghai said a high taxation regime (14.5%) on grain sale makes wheat available under OMSS costliest.

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First published on: 08-11-2012 at 00:26 IST
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