Capping Wheat Stocks: Extra Precaution
Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.
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By Linus Garg
First publised on 2023-06-16 07:22:46
About the Author
Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.
View all posts by this Author
The Centre has capped stocks which wheat traders and processors can keep at a time. Stock limits will be applicable for each entity individually. For traders/wholesalers it will be 3000 tonne, for retailers 10 tonne for each of the retail outlets and for big chain retailers 10 tonne for each outlet and 3000 tonne at all their depots. For processors the limit has been set at 75 per cent of annual installed capacity. It comes into immediate effect and will continue till March 31, 2024. This is being done for the first time after August 2006. Then, caps were put in place for two and a half years due to fall in domestic production, falling inventories in public warehouses and rising international prices of wheat. The government was concerned that if wheat prices shot up unreasonably it would lead to food inflation.
But in 2023, the situation is not that bleak. Wheat production was 112.7MT in 2022-23. Government procurement was a healthy 26.2MT. International prices have eased to $230-250 from the level of $420-430 a year ago. The Centre had sold 50 lakh tones of wheat early this year in the open market to cool atta prices (and that had brought the prices down by Rs 6-8 per kilo). So what was the need to take this early precautionary measure?
There is no doubt that rain has been playing truant this year. As of now, India is running 50% rain deficient. Further, most experts have issued El Nino warnings. Both these factors can lead to lower production of wheat this year.
Besides that, food inflation is declining, leading to a comfortable position for policy makers. The government does not want to take any risks, mainly because of the Lok Sabha polls in April-May 2024. Export of wheat is already banned. But the government must continuously review the position and remove the restrictions as and when the position is comfortable and if the wheat production in 2023-24 is as expected.
