Govt Urges Trade Houses To Refrain From Buying Wheat To Help FCI Recover Its Depleting Stock: Report

The surge in grain prices is forcing the government to dump record-high levels of produce to bolster domestic supply, in turn, impacting the reserves needed for the country’s food welfare programme

The Indian government is reportedly urging global and domestic trade houses to allow the Food Corporation of India (FCI) to stock up on wheat to recover its depleting reserves, media reports said.

According to sources, the government is asking the traders to avoid purchasing the new season wheat stock from local farmers to help maintain the inventory of the FCI, reported Reuters. 

Keep Price In Check

India is the second-biggest consumer and grower of wheat after China in the world. The surge in grain prices is forcing the government to dump record-high levels of produce to bolster domestic supply, in turn, impacting the reserves needed for the country’s food welfare programme. The programme, the biggest in the world, allows free gain for about 800 million people. 

Notably, India placed a ban on wheat exports in 2022 and is trying to manage stocks after the dry weather in 2022 and 2023 impacted the grain’s output. The authorities are trying to keep a tab on the price, the report said. 

The authorities have informally approached private traders and urged them to refrain from purchasing wheat at least in April, the report said citing trader and government sources, who wished to remain anonymous. This guideline comes for the first time since 2007. 

Typically, wheat procurement starts diminishing after mid-May. The report quoted a Mumbai-based trader who said, “We are not going to buy in April. We will wait until May. Except for processors and small traders, everyone is likely to follow the government's lead.”

Currently, the traders active in the Indian grain markets include Hindustan Unilever Ltd, ITC Ltd, Louis Dreyfus Company, Cargill Inc, and Olam Group. The government has also reached out to the states producing the grain to ensure that private traders don’t hamper the FCI’s plans to purchase at least 30 million metric tonne of the produce this year, the sources stated. 

Notably, the FCI purchased 26.2 MMT of wheat from local farmers, missing its target of 34.15 MMT. This led to a decline in the wheat stock in government warehouses to 9.7 MMT, as of March start, marking the lowest level since 2017. The decreased wheat inventories can cause a surge in open market prices.

Wheat Imports

However, the government has refused to allow wheat imports, as the purchases could upset the farmers who form a crucial voting segment in the nation heading for the parliamentary election, starting in April. 

A report by the United States Department of Agriculture last week noted that the low stocks of grain could force India to import nearly 2 MMT produce in the year.