Price Of Wheat And Atta Is Causing Concern And Adding To Food Inflation
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By Our Editorial Team
First publised on 2023-01-30 07:02:22
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The India Commentary view
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Although inflation has subsided (at 5.72% in December, it is now just below the upper threshold (6%) of the RBI tolerance band for the second month running) and food inflation has also gone down due to the drop in prices of vegetables, fruits and some other staples, the price of wheat and atta continue to remain elevated, causing hardships to the people. Although more people eat rice in India than wheat, the fact remains that in 2021-22, India consumed 104520 thousand metric tonnes of wheat. With the wheat crop suffering reverses in 2022 due to untimely and excessive hot weather, India's output was much lower than usual, leading to less procurement by the government as also lower arrivals in the open mandis. This has led to the price of wheat ruling at Rs 30 per kg and unbranded atta at Rs 37 per kg (branded atta is much higher and is ruling between Rs 45 and Rs 58 per kg) this year, at least Rs 10 higher than last year.
To ease the prices, the government has decided to release up to 3 million tonnes (mt) of wheat from its stocks in the open market. But in this regard, the government's options are limited as it has stocks of just 17.17 mt of wheat now against its minimum requirement of 13.8 mt. This makes open market intervention to cool prices a risky proposition, more so because despite a record sowing of 34 million hectares of wheat crop this year, the output cannot be taken for granted due to the vagaries of weather. Last year too huge crop was planted but the rise in temperature in March destroyed a large quantity of the crop and wheat output fell to just 106.84 mt (with some market operators even saying it was not higher than 95 mt). If the expectation of a record crop this year on the back of higher acerage and high yielding varieties planted is fulfilled, prices might come down. But that totally depends on the weather. If it plays truant like last year, the crop will be substantially lower and that will put further pressure on prices.
The government had already banned export of wheat from India in May last year after a bad crop. It must now consider importing about 3-4 mt of wheat both to tide over the current situation and as an insurance against crop failure this year. It will not be harmful for farmers as the current crop will take some time to mature and will be harvested only in end-March. The imports will ease prices of wheat and atta for the next two months and if the crop is good this year, normalcy will be restored through market operations.
pic courtesy: RTPC Ltd (caption ours)
