The Aryavarth Express
Agency(New Delhi): In an effort to enhance its dwindling food reserves, the Indian government has issued a directive to both international and local trading entities, urging them not to procure wheat from this season’s harvest. This move is intended to allow the Food Corporation of India (FCI), supported by the government, to amass significant amounts of wheat, thus strengthening its stockpile. India, recognized as the second-largest wheat consumer and producer globally, next only to China, has halted wheat exports since 2022 with the aim of accumulating reserves and controlling the inflation in prices triggered by inadequate rainfall, which adversely affected the wheat yield in 2022 and 2023.
The surge in wheat prices compelled the administration to distribute unprecedented volumes of wheat to enhance domestic availability, which resulted in a significant reduction in reserves critical for the largest food welfare scheme in the world. This program guarantees nearly 800 million individuals access to free grain.
Private merchants have been specifically advised to refrain from participating in wholesale markets where farmers generally sell their crops either to the FCI or private buyers, according to information from traders and government officials who chose to remain anonymous due to restrictions on their authorization to engage with the press.
This informal guidance from the government to private traders, aimed at abstaining from wheat purchases particularly in April, marks the first instance of such advice being offered since 2007. The procurement of wheat typically diminishes following mid-May.
A trader affiliated with a global trade house in Mumbai mentioned, “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.”
Notable traders in India’s grain markets include Cargill Inc, Hindustan Unilever Ltd, ITC Ltd, Louis Dreyfus Company, and Olam Group.
The government has communicated with the principal wheat-producing states, insisting that private traders should not hinder FCI’s objective to procure at least 30 million metric tons of wheat this year.
In the previous year, FCI’s acquisition of wheat from local farmers amounted to 26.2 million metric tons, falling short of its 34.15 million metric tons goal.
The decrease in purchases last year led to wheat stocks in governmental warehouses dropping to 9.7 million metric tons at the beginning of March, marking the lowest level since 2017. Such a decline in wheat reserves often leads to increased prices in the open market.
Despite the dwindling stockpiles, the Indian government has not yielded to suggestions of importing wheat, considering that such actions could upset farmers, who represent a significant electoral group.
As India approaches its parliamentary elections starting on April 19, the concern over reduced wheat reserves raises the possibility, as per a report by the United States Department of Agriculture, that India might need to import 2 million metric tons of wheat this year.
FCI’s procurement efforts are particularly focused on Uttar Pradesh, a leading wheat-producing state, which has traditionally contributed less than 2% to FCI’s wheat procurement. The state government has requested that railways refrain from providing freight cars to large traders in April.
Additionally, Uttar Pradesh has directed local officials to prevent big traders from purchasing extensive quantities of wheat, as indicated in a government letter addressed to district authorities and reviewed by Reuters.
Recently, FCI commenced the purchase of new wheat from farmers at a government-fixed rate of 2,275 rupees ($27.29) per 100 kg, which is below the open market price of approximately 2,500 rupees.
