Government to sell more wheat, rice in open market to cool prices

Retail food inflation surged to 4.49 percent in June from 2.96 percent in May.

The Indian government will sell an additional 50 lakh tonnes of wheat and 25 lakh tonnes of rice under Open Market Sale Scheme (OMSS) to bring down prices of the two essential commodities.

As on August 7, in one year, wheat prices have gone up by 6.77 percent in the retail market and 7.37 percent in the wholesale market. Similarly, rice prices in the retail market have gone up by 10.63 percent and 11.12 percent in the wholesale market.

Speaking at a briefing on August 9 in the Capital, Food Secretary Sanjeev Chopra also said the reserve price of rice was being brought down by Rs 2 to Rs 29 per kg.

The step comes after the Food Corporation of India was unable to find any takers for rice being sold via OMSS. As of date, the government has been able to offload a mere 0.38 percent (19,000 tonnes) of the total 5 lakh tonne of rice it offered, as per government data.

Meanwhile, a total of 55 percent of wheat offered through OMSS has been sold. Of the 15 lakh tonne wheat it offered on June 23, 8.2 lakh tonne has been sold in seven e-auctions held so far.

Also Read: Government closely monitoring prices of cereals, will take steps as and when needed: MoS Agri

"The weighted average selling price of wheat has risen with every auction showing there is a continued demand for the commodity. We hope these measures will bring down food inflation," Chopra said.

While the weighted average selling price of wheat rose from Rs 2,136 per quintal in the first auction held on June 28 to Rs 2,254 per quintal on August 9, that for rice came down from Rs 3,175 at first auction on July 5 to Rs 3,163 on August 9.

The government's decision comes amid a sustained and sharp rise in the price of cereals following Russia's invasion of Ukraine in February 2022. While India has already taken steps to check the rise in prices of key food items, cereal prices have continued to rise as unseasonal as well as uneven rainfall has taken a toll on output.

"Even though we have taken several steps to control prices, they have refused to come down. The government is taking several measures to bring down inflation. Many other options including import duty cuts are under consideration," Chopra added.

The ban on wheat exports, announced in May 2022, remains in place. In June this year, the government imposed stock limits on wheat for the first time in 15 years to prevent hoarding and bring down prices.

The government on July 20 also banned the export of non-basmati white rice.

However, despite these supply-side decisions, the prices of everyday staples have refused to come down.

The finance ministry in its Monthly Economic Review report on August 3 advocated for a guarded approach by the government and the Reserve Bank of India (RBI) to tackle the recent jump in food inflation.

Also read: After rice, govt may consider steps to arrest price rise in pulses, wheat: Source

India’s overall food basket has been witnessing a sustained rise in cost in the past few months, with the prices of wheat, rice, milk, vegetables, and pulses firming up. According to economists, Consumer Price Index (CPI) inflation is set to rise massively in July, with some even predicting last month's headline retail inflation rate - which will be released on August 14 - may have crossed 7 percent on the back of higher food prices, particularly those of vegetables, cereals, and pulses.

In June, CPI food inflation surged to 4.49 percent from 2.96 percent in May, pushing up the headline retail number to 4.81 percent from 4.31 percent.

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