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Journalism of Courage
The food ministry is considering a proposal to allow 2 million tonne of additional wheat exports at a floor price of around $300 per tonne through state-run trading agencies to ease storage,a senior government official said.
This will be over and above the quantity in the ministrys proposal before the Cabinet Committee on Economic Affairs (CCEA),which is scheduled to be taken up on Friday. The ministry has proposed to allow sales of 10 million tonne of wheat and 5 lakh tonne of rice through the open market sale scheme (OMSS). The subsidy outgo on such bulk sales would be close to R5,500 crore.
According to the OMSS proposal,of the 10 million tonne of wheat,bulk consumers will be offered as much as 8.5 million tonne from warehouses in Punjab and Haryana at a price of R1,500 per quintal. The two states have been facing a daunting challenge on the storage front,especially since monsoon rains pose grave risks to stocks kept under tarpaulin or in the open field.
As much as 1 million tonne of wheat from godowns in other parts of the country will be up for sale to small traders and another 500,000 tonne for retail consumers and co-operatives,the official said.
“Inflation in wheat and rice is at an elevated level. Apart from addressing storage woes,sales under the OMSS are aimed at controlling prices in the open market,” the official told FE. A sharp depreciation of the rupee is expected to help exports,he added.
Wholesale food inflation in May rose to 8.25% from 6.08% in the previous month after the price rise in rice hit this year’s highest at 18.48% and wheat rates advanced 12.65%.
The official said the government has revived plans for exports through state agencies despite a tepid response from private traders earlier this year as the rupee has depreciated sharply against the dollar and worries about the wet weather delaying the pace of the US winter harvest still persist. However,the grain is still hovering around this year’s lows. Chicago Board of Trade July wheat lost 1% in intraday trade on Thursday to $7.00-1/4 a bushel,having rose 2.8% in the previous session.
State-owned trading companies,such as STC,MMTC and PEC,have shipped close to 4 million tonne of wheat from official reserves so far out of the 4.5 million tonne allowed by the Centre since April 2012. In March,the government also decided to allow an additional 5 million tonne of wheat exports from its reserves through private traders at a floor price of R14,800 (roughly $270 then) per tonne to hasten the shipment process. However,the plan didn’t succeed due to lack of interest by private traders who considered the price uncompetitive in times of falling global prices.
The government is facing a storage crisis with official stocks swelling to 77.7 million tonne as of June 1 compared with a storage capacity of around 64 million tonne. Stocks surged due to huge procurement after wheat production hit a record 94.88 million tonne in the crop year through June 2012. Production is expected to touch 93.62 million tonne in 2012-13.
