Opinion Express View on wheat procurement: Relief amid fear of inflation, poor monsoon

Wheat procurement by government agencies has touched 20.5 million tonnes (mt) in the ongoing rabi marketing season. The fact that it has already crossed the 18.8 mt for the whole of the last season is proof of a better crop this time. Last year’s heat wave-impacted crop, in combination with surging prices fueled by export demand and the Ukraine war, had resulted in governmental wheat purchases plunging to the lowest since 2007. This year’s crop has also suffered damage from unseasonal rains during the second half of March, but production doesn’t seem to have taken as much of a hit. That should be a matter of comfort, especially given the stocks of wheat at the start of the current marketing season. These, at 8.3 mt, were the lowest in six years and just over the required minimum of 7.5 mt for April 1.

A second reason for comfort is the prospect of El Nino, which many global weather agencies are predicting may develop during May-July. That could adversely affect the coming monsoon and, in turn, rice production during the ensuing kharif crop season. In 2022-23 (April-March), offtake of grain under various government schemes totalled 92.7 mt. The share of rice in that was 63.8 mt and wheat at 28.9 mt. Low wheat stocks in government godowns meant that the burden of feeding the public distribution system was largely borne by rice. Replenished wheat stocks from higher procurement should help take some load off rice now. That is required, more so in the event of a poor monsoon after four consecutive years of good rainfall. The government would also want sufficient stocks of both wheat and rice in a year leading up to the general elections.

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While one has to wait for the final procurement figure — the government has targeted total wheat purchases of 34.1 mt — the trends so far should provide relief to the RBI as well. Cereal inflation, at 15.3 per cent year-on-year in March, has been a major worry for the central bank. That should hopefully subside somewhat when its monetary policy committee meets next in early June to decide on the course of interest rates. The next few months — particularly how the southwest monsoon season from June to September pans out — are going to matter, both for Indian agriculture and the overall supply position with regard to inflation. Thankfully, global food prices have eased and that should considerably aid the government’s supply management programme.