Govt, traders fight over wheat prices

The grain mandis of Punjab and Haryana are likely to turn into battlegrounds for wheat procurement by the Food Corporation of India, the government's procurement agency, and large grain trading houses.

While the government has raised the minimum support price of wheat by Rs 100 to Rs 750 per quintal, trading companies, it is reliably learnt, have booked through artiyas (commission agents) huge quantities of wheat at rates of Rs 850 per quintal in Punjab and Haryana.

The government has also swung into action to ensure that it is able to procure adequate quantities and avoid imports at exorbitant rates. This month, the government banned wheat export for calendar year 2007 to ensure its domestic availability.

However, the zero duty on wheat imports that the government allowed last year lapses this month. The industry, particularly flour millers, want it to continue for the year.

According to the second advance estimates of the Ministry of Agriculture, wheat production in the present rabi season is likely to touch 72.5 million tonnes, against 69.5 million tonnes last year. In 2006, FCI managed to procure only 9.2 million tonnes of wheat, against 14.8 million tonnes in 2005.

Companies like ITC, Adani, Cargill, and Ruchi, among others, procured at least 1.4-1.5 million tonnes of wheat at rates higher than the MSP of Rs 650 per quintal.

Consequently, the government imported 5.5 million tonnes of wheat to meet the demands of the public distribution system, which supplies grain to poor consumers at subsidised prices. But the government will have to offer a bonus above the MSP well in advance, unlike last year when the bonus was announced late, to procure wheat quantities sufficient for the PDS.

"FCI will not be able to procure adequate wheat at the MSP in Khanna mandi, since farmers are unlikely to sell below Rs 800 per quintal. Even in 2006, FCI was not able to procure much," said D C Singla, director of Khanna-based Arti Roller Mills.

Khanna, in Punjab, is Asia's largest grain market. In 2006, trading houses had procured about 60 per cent of the grain that came to Khanna mandi.

Big trading houses like Adanis, ITC, Cargill, Reliance and AWB have procurement licences issued by state agricultural bodies. They also have storage space booked with private and state warehousing corporations.