The Hindu Business Line : Wheat procurement: Govt in state of panic

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Mumbai Feb 20 The report of the Centre asking corporates to refrain from buying wheat in the open market shows that panic drives people berserk. This government is in a state of utter panic. Inflation continues to climb, week after week, fuelled by tightening stocks and rising prices of essential food products, raising serious concerns across political parties and across the nation.

Deployment of a variety of weapons in the policymakers' armoury has brought little success on the price front in recent months. Now the Government has come down to using even strong-arm tactics, making a mockery of the extant policies of liberalisation and trade freedom.

Will FCI succeed in procuring 14-15 million tonnes (mt) of wheat this season if major corporates are forced to keep off? Not necessarily. The market clearly knows the fate of the wheat crop. By the Government's own estimate, the crop size is likely to be 72.5 mt, lower than the target of 75.5 mt, but 3 mt higher than last year. The final output could be lower than the current estimate. The wheat market is expected to rule firm, with the opening price not less than Rs 850 a quintal. Whether the government would announce a bonus remains to be seen.

Last season, bonus announcement came three weeks too late.

Naïve hopes

Unlike in the last season, even if major corporates are absent this time, nothing can prevent multitudes of small traders from buying wheat in the hope of a price spurt and windfall profit. Indeed, major corporates can actually operate indirectly through small traders although this would be a slightly tortuous route.

Yet, given the demand supply fundamentals, it would be naïve to believe that the market would soften if large private sector players were kept off.

Planning for import should begin in right earnest. But the world market is currently not importer-friendly. The landed cost could be as high as Rs 11,000 a tonne.

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