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Wheat open sale prices revised yet again -- FCI reverts to zone-wise pricing scheme

Harish Damodaran

NEW DELHI, July 2

BARELY a month after announcing a uniform all-India price of Rs 700 per quintal for the wheat disposed under its open market sale scheme (OMSS), the Food Corporation of India (FCI) has once again reverted to a variable, zone-wise pricing structure.

The new OMSS rates fixed by FCI's High Level Committee are Rs 650 per quintal for the North zone, Rs 695 per quintal for the West zone, Rs 705 per quintal for the East and North-East zones and Rs 720 per quintal for the South zone. These are effective fr om July 1, FCI officials said.

Earlier, for June, FCI had fixed a uniform all-India price of Rs 700 per quintal. Thus, roller flour mills (RFM) all over the country - whether they were close to producing centres such as Punjab and Haryana or located in distant consuming States as Kera la or Tamil Nadu - could access wheat from FCI godowns at a single rate of Rs 700 per quintal.

The latest revision in OMSS prices has been done ostensibly to placate millers in the North, who have found the Rs 700 per quintal rate to be on the higher side. But even the new Rs 650 per quintal rate may not really satisfy the northern RFMs, consideri ng that open market prices continue to rule at much lower levels. Benchmark wheat dara on Monday was quoting at Rs 590-595 per quintal in Delhi and at Rs 565-575 per quintal in the neighbouring mandi of Hapur.

On the other hand, the increase in the open sale rate from Rs 700 to Rs 720 per quintal in the South and to Rs 705 per quintal in the East would only further depress offtake levels. ``We are now able to access wheat from Uttar Pradesh here at Rs 710 per quintal. Why should we lift FCI wheat, which is of poor milling quality, at Rs 720 per quintal?,'' quipped Mr P.K. Suhaib of Pondy Roller Flour Mills in Mahe, near Kozhikode.

Millers feel that the absence of stability in pricing and the frequent change of rates was one of the main reasons for poor offtake under the OMSS, which fell from 4.4 million tonnes in 1999-2000 to hardly seven lakh tonnes in 2000-01. Open sale prices o f wheat have been subjected to regular tampering over the last one-and-a-half years or so.

The process began with the Government slashing OMSS prices on December 3, 1999 to Rs 688, Rs 697, Rs 699 and Rs 705 per quintal for the North, West, East and South zones, respectively, from their corresponding earlier levels of Rs 690, Rs 725, Rs 748 and Rs 747 per quintal. But following the 2000-01 Union Budget decision to hike issue prices to cover FCI's average economic cost of procurement and distribution, the OMSS rates were raised to a uniform all-India level of Rs 900 per quintal with effect from April 2000.

However, with offtake levels plunging, FCI was forced to restore the earlier zone-wise differential pricing structure, with the OMSS rates from August 2000 being fixed at Rs 650, Rs 724, Rs 736 and Rs 743 per quintal for the North, West, East and South z ones, respectively. This variable pricing was subject to further tampering when it was decided, from March 2001 onwards, to have one price (Rs 650 per quintal) for the North and another uniform rate of Rs 700 per quintal for the other three zones. And by June, FCI had opted for a uniform all-India rate of Rs 700 per quintal.

But from the present month onwards, it is back to a variable pricing structure.