FCI's Open Market Sales Of Wheat: A Brief Overview

The Food Corporation of India (FCI) has been selling wheat in the open market to control the rising prices of staple food grain in the country. The government announced on 25 January  2023 that FCI would offload 30 lakh tons of wheat from the central pool in the markets under the Open Market Sale Scheme within the next two months. With the help of this strategy, FCI was able to sell wheat on average for Rs 2,196/quintal as opposed to the Minimum Support Price (MSP) of Rs 2,125/quintal that had been set for the upcoming procurement season (2023–24), which will begin on 1 April 2023.

Current Season’s E-auctions

The recent e-auction conducted by FCI was the fifth in the current season, where more than 1,000 bidders across 23 states participated. FCI sold 5,40,000 tons of wheat to private bulk buyers such as flour millers and food companies, taking the total grain sold in the open market this year to 2.84 MT. Through open market sales, the market prices of wheat have declined to close to MSP at present from Rs 3,000/quintal that prevailed at the beginning of the year. So far, selling wheat on the open market has brought in almost Rs 6,000 crore for FCI.

Last E-Auction And Stock Availability

FCI is likely to hold the last e-auction next week only in non-procuring wheat states, and another 0.3-0.4 MT of wheat is likely to be sold in the last e-auction. As of Thursday, FCI has a wheat stock of 11 MT while the buffer requirement for 1 April 2023, is 7.4 MT. According to the Food Ministry’s assessment, the wheat stocks to be held with FCI by 1 April 2023, would be around 9.7 MT against a buffer of 7.4 MT.

Impact On Prices

Wheat price inflation in January 2023 increased sharply by 25.05% year over year, raising retail food inflation to 5.94% from the 4.19% previously reported. The Department of Consumer Affairs reports that on 9 March 2023, the average price of wheat and flour (atta) increased to Rs 28/kg and Rs 35/kg, respectively, from Rs 25/kg and Rs 32/kg that were in effect three months prior. However, because it takes about a month from the time wheat is purchased until it is processed into atta and sold on the market, food experts forecast that the prices of wheat and atta would decline much more over the following few weeks.

Insight

According to the open market sale policy, FCI occasionally sells food grains, particularly wheat and rice, to wholesale customers and private merchants in the open market at predetermined prices, to increase supply and lower prices during the lean season. The government’s procurement campaign for the upcoming marketing season, which will start on 1 April 2023, has improved prospects thanks to the agriculture ministry’s forecast of a record 112.18 MT wheat harvest for the 2022–23 crop year (July–June).

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