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Mounting pressure to clear wheat stocks

G. Chandrashekhar

MUMBAI, Aug. 10

FOR those watching the Government's unease in trying to somehow get rid of the unmanageable volumes of public stocks of foodgrains, the further slashing of wheat prices announced on August 9 should come as no surprise. The Government is under tremendous pressure to liquidate at least a part of the massive stockpile; but there are few takers.

The Food Corporation of India (FCI) which is holding about 27 million tonnes of wheat that includes a record procurement of 16 m.t. made in the last four months, has been asked to sell in the open market at a lower price of Rs. 650 per quintal, a reducti on of Rs. 100 a quintal. Sale at this price will be effected from all FCI warehouses in the northern parts of the country.

There are serious doubts if the latest scheme would meet with any great success or help vacate scarce warehouse space needed for the ensuing kharif season. Already, markets in North India are flooded with wheat following the harvest of a record 74 m.t. I n the major marketing yards, wheat is traded at Rs. 580-590 a quintal, i.e. close to the procurement price.

For millers in the southern parts of the country, the new scheme may not make much economic sense as handling and transportation costs will be high. Obviously, the Government's pricing is unhelpful for the South-based units.

Unlike rice which is produced virtually across the country, wheat production is confined to the northern region. The pricing strategy will have to take this fact - regional nature of production - into account. If wheat consumption has to be popularised i n the South - traditionally a rice eating region - the material must be moved from the producing to the consuming centres.

Moreover, most traders and roller flour mills are not comfortable dealing with FCI. For many, it is a supplier of last resort. Unless there is a substantial financial gain or attraction in dealing with FCI, roller flour mills would turn to easier, market -friendly avenues of purchase.

Other outlets are also virtually blocked. For over two months, the Government has been talking about exploring export possibilities. But there is little evidence of an aggressive marketing drive.

Even last week the Minister of State for Food and Consumer Affairs stated in Parliament about the Government having taken ``a decision to explore the possibilities of commodity loan/barter trade of wheat with SAARC countries or other countries which coul d supply us other commodities in exchange''. What effective steps the Government has so far taken for exploring the possibilities is unclear.

The Minister also talked about ``plans to export wheat on a Government-to-Government account''. The international wheat market is currently a buyer's market. World prices are low and are expected to remain so for some time. The cost of Indian wheat is hi gher by $40-60 a tonne or 30 per cent above global rates.

For 2000-01 too global production prospects are satisfactory and world trade is forecast to remain unchanged at about 104 m.t. Major exporters are holding high levels of stock. It would therefore not be surprising if the Government's plans to export wh eat come to a nought. The cost of holding such unconscionably large buffer stocks will escalate inexorably.

Unable to vacate sufficient warehousing space by failing to liquidate excessive wheat stocks, the Government may be forced not to purchase paddy directly from farmers in the ensuing kharif harvest season. Paddy farmers will be at the mercy of rice miller s.