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Wheat prices gain in India on higher export and festival demand, but still rule below MSP

Industry sources suspect that wheat might have been diverted from the PDS for exports since the Union Government had allocated 10 million tonnes of rice and wheat for free-of-cost distribution under Prime Minister Garib Kalyan Yojana.

October 30, 2020 / 04:38 PM IST
Representative Image

Representative Image

Wheat prices in Indian markets have increased over the last couple of weeks following its exports to countries such as Bangladesh, Sri Lanka and Pakistan, besides demand for the festival season.

They, however, are ruling lower compared with the same period a year ago.

“Wheat prices had dropped lower than the minimum support price (MSP) after the Centre finished procuring nearly 40 million tonnes (mt) till June for buffer stocks that will help distribute foodgrains through the public distribution system. But prices have increased by Rs 100 a quintal in the last couple of weeks,” said Raj Narayan Gupta, a Delhi based flour miller.

According to Ministry of Agriculture data, wheat in Madhya Pradesh markets is currently quoted at Rs 1,660 a quintal against Rs 1,560 a week ago. This is against the MSP of Rs 1,925 for the Rabi marketing season that ended in June this year.

“Wheat delivered at mill gates in South India is around Rs 2,000 now after it dropped to Rs 1,900. Last year during the same time, the cost was Rs 2,500,” said Pramod Kumar, Senior Vice-President, Roller Flour Mills Federation of India (RFMFI).


Gupta said wheat delivered at mill gates in Delhi dropped to Rs 1,750 at one of time from Rs 1,950 during June when Central procurement was in full swing. “Prices then increased to Rs 1,850 and again now by Rs 100 on rising demand particularly due to festival season,” he said.

“Private players are exporting wheat on a large scale. They are now exporting to countries such as Bangladesh resulting in prices gaining by Rs 150 a quintal,” Kumar said.

Besides Bangladesh, Sri Lanka and Pakistan, India is also shipping wheat to Lebanon and Afghanistan. The Union Government had announced its April that it would export wheat to Lebanon and Afghanistan under a government-to-government programme.

These developments have helped in wheat exports surge 206 per cent during April-September this year. Higher wheat exports are one of the factors that have helped agricultural exports rise 43.4 per cent in the first half of the current fiscal.

However, the huge rise in wheat exports has raised suspicion about the foodgrain being diverted from the public distribution system (PDS).

A Times of India report said that wheat exports to Bangladesh through Bengal border have been suspended since October 23 based on a first information report filed by the Customs Department.

The Customs Department is investigating if wheat, being exported to Bangladesh, had been diverted from the PDS.

Industry sources suspect that wheat might have been diverted from the PDS for exports since the Union Government had allocated 10 million tonnes of rice and wheat for free-of-cost distribution under Prime Minister Garib Kalyan Yojana (PMGKY).

“One important question from the industry is how are private players supplying wheat to other countries at Rs 1,700 and Rs 1,800 a quintal,” said Kumar.

The supply of free food grains under PMGKY is also a reason why wheat prices dropped in the open market after June.

Gupta said free wheat distribution affected open market prices for the food grain.

“There was lack of demand for atta and wheat products,” Kumar said.

“Hotels and restaurants, which buy wheat flour and other products such as maida and sooji, were affected due to novel Coronavirus pandemic. It also affected offtake and pulled the prices down,” Gupta said.

Flour mills and other user industries are, however, confident that they will not face any problem with regard to wheat supplies.

“Maybe, prices may go up by another Rs 100 but we see no problem of availability at least till December,” Gupta said.

“Some of the mills and users such as ITC Ltd and Brittania are covered till March,” Kumar said.

ITC and Britannia, huge industrial users, use wheat for most of their products from bread to biscuits to pasta.

The user industry isn’t worried over the surge in exports as the Food Corporation of India (FCI) had a record 28 million tonnes of wheat stocks carried over from last year.

In addition to the carryover stocks, India, according to the Ministry of Agriculture, is estimated to have produced a record 107.59 million tonnes of wheat this year.

The huge crop and lower prices in the domestic market have ruled out imports.

According to Kumar, imported wheat currently costs $255-260 a tonne (Rs 1,900-1,940 a quintal). Imports also attract a 40 per cent Customs duty.

(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)
Subramani Mancombu
first published: Oct 30, 2020 04:38 pm
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