The central government’s steps to rein in rising food inflation through initiatives like weekly auctions of wheat and rice under the Open Market Sale Scheme (OMSS) met with lukewarm response for rice, even as wheat saw brisk off-take.
In the 15th e-auction held on October 4, Food Corporate of India received bids for only 0.05 LMT (lakh tonne) of rice out of 4.87 LMT offered across 264 depots in the country. In comparison, 1.89 LMT of wheat out of 2.01 LMT offered was picked up by 2,255 bidders.
The muted demand for rice indicates the government may be facing difficulties in offloading the surplus stock through OMSS scheme. Poor offtake despite offering rice at discounted reserve prices points to adequate availability in the market, and may prompt further auctions at lower prices.
Auction Details
In the latest auction, the Food Corporation of India (FCI) offered 4.87 LMT of rice from 264 depots at a reserve price of Rs 2,932.83 per quintal (Rs 29.33/kg). However, only 0.05 LMT was picked up at an average price of Rs 2,932.91 per quintal.
For wheat, 2.01 LMT was offered from 481 depots at a reserve price of Rs 2,150 per quintal (Rs 21.50 per kg). A total of 1.89 LMT was sold at an average price of Rs 2,185.05 per quintal.
To encourage small buyers, the government had set a limit of maximum 1,000 tons of rice and 100 tons of wheat per bidder. However, low demand indicates this step did not boost rice uptake.
The tepid response comes despite the scheme being opened to bulk consumers like roller flour millers, wheat products manufacturers, etc, besides small and marginal traders.
Trade sources cite several reasons for lukewarm demand for rice in OMSS auctions, including comfortable rice inventories after back-to-back bumper harvests in last two years, import of rice under tariff rate quota at low costs, lower exports due to global slowdown and mandatory procurement by states like Chhattisgarh.
They also pointed out that demand for rice may rise as festive season picks up.
The response indicates the government may need to reconsider quantity offered through OMSS or lower reserve prices to improve offtake.
On the positive side, the muted demand is positive from inflation control view as comfortable rice stocks will prevent any price rise. The government can utilize surplus rice for additional free distribution.
Wheat Auctions
In contrast to rice, the wheat auctions have received good response in last few months. 1.89 LMT was sold in the latest auction, nearly 94% of the quantity offered.
Wheat uptake has been robust as government is offloading stocks to prevent untimely deterioration amid reports of poor wheat crop owing to heatwave. There are also concerns over lower wheat output next year due to delayed sowing in parts of UP, Punjab and Haryana.
Bulk buyers like roller flour millers and wheat product manufacturers have been active in wheat auctions to ramp up inventory. Small players are also buying to meet festive season demand for wheat-based sweets and snacks.
The wheat auction response reinforces government’s buffer stock release is vital to cool prices during inflation and supply disruptions. Timely offloading of grains through OMSS will check cereal price rise and enable direct purchase by bulk consumers.