Wheat prices climb amid delay in open-market sales by the Centre

With wheat prices scaling new highs since the start of this month, all eyes are now on the open market sales of grains by the Centre.

Trade sources said the sale may have come under some sort of cloud due to the recent raids on Food Corporation of India (FCI) officials and questions over the actual size of the stocks that the corporation holds.

Officially, the data shows that, as on January 1, 2023, India’s wheat stocks in the central pool were estimated around 17.17 million tonnes. This is almost 24.4 per cent more than the buffer and strategic reserve requirement for that date.

Of the 17.17 million tonnes of wheat stocks in the central pool, around 10.5 million tonnes (almost 61 per cent) is with state agencies.

Despite that, between January 1 and 17, wheat prices in Delhi’s Lawrence Road market have risen from Rs 2,900 per quintal to almost Rs 3,060-3,100. This is a rise of around 3-7 per cent in less than 20 days.

The spike in prices coupled with almost-empty pipelines has renewed calls from flour mill owners for the government to liquidate some part of its wheat inventory for domestic consumers that would immediately cool down prices.

“The Centre should immediately liquidate some stocks from its inventories. This will cool down prices as pipeline stocks with stockists and wholesalers are almost empty, while demand is firm,” said Rahul Chauhan, commodity analyst at iGrain India.

Sources said the traders expect the Centre to liquidate around 2 million tonnes of wheat from its stocks.

It feels that the recent decision to end Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY) from January 1 has given the Centre added flexibility to intervene in the market.

However, some feel that the recent raids on FCI officers and questions on the actual wheat stock levels amid allegations of large-scale fudging seem to have pulled the Centre’s feet back.

The nationwide crackdown, nicknamed “Operation Kanak”, was undertaken a few days back against officials of the FCI by the Central Bureau of Investigation (CBI).

The agency, as part of the operation, conducted searches at 50 locations in Punjab, Haryana and Delhi following the arrest of a DGM-rank officer.

The CBI launched the crackdown after a six-month-long undercover operation to identify suspects in the syndicate. These include officers, rice mill owners and middlemen for allegedly indulging in corrupt practices, sources said.

The agency was working on exposing a nexus engaged in the procurement, storage and distribution of foodgrain.

The raids have also fuelled market chatter that actual grain stocks in the central pool as on January 1, 2023 are much lower than what is being claimed by the government.

Another factor, which some traders are claiming as being the reason for delay in open-market sales, is new crop arrivals.

The earliest sown wheat is expected to start arriving in the market, first from Gujarat by late February, which leaves just around 40 days from now.

“Any big open market intervention will also be with the objective of bringing down prices so that Centre can procure its annual wheat quota as and when it starts after a few months,” a trader said.