bAs such, every year in mid-April, the markets of Punjab and Haryana witness peak arrival of wheat and its procurement. This year till April 14, 2023, only 31.5 lakh tonnes of wheat was procured. Hence it is a great achievement of the state agencies of Punjab, Haryana and Madhya Pradesh that the all India procurement has reached 261 lakh tonnes by May 18, 2023. The government may have to allow zero duty import of wheat.
The quantity procured so far should be sufficient to meet the requirement of wheat for the Public Distribution System under the National Food Security Act 2013 (NFSA), now renamed as the Pradhan Mantri Garib Kalyan Yojana (PMGKAY). But this is much lower than the procurement estimate, which was 34.15 million tonnes.
In view of the general elections due in April-May 2024, the lower procurement leaves the government an opportunity to make any additional allocations. Incidentally, an additional allocation of 5 kg of foodgrains per person per month, free of cost, is given as was proposed. One of the main reasons for the victory of the BJP in the March 2022 assembly elections in Uttar Pradesh.
what do the projections tell
Due to extreme temperatures in February and unseasonal rains in March and early April 2023, it was feared that wheat production would be lower than the second estimate (released on 14 February 2023) of production of 112.18 lakh tonnes. The trade estimate of production is less than this. Since there is a ban on the export of wheat, the private business will not buy any for export. It is also possible that farmers in Haryana, Uttar Pradesh and Madhya Pradesh have held on to wheat in anticipation of higher prices.
The low procurement is therefore evidence that the official estimate of production may be higher.
This is the second year in a row that wheat production is less than the government’s estimate. The initial estimate of production last year was 111.32 million tonnes, which was later revised to 107.74 million tonnes. Domestic consumption of wheat is estimated to be around 97 million tonnes in 2021-22. Therefore, any serious shortfall in production is likely to result in inflationary pressures on wheat. This explains the double digit inflation in wheat in 2022-23. By January 2023, wholesale wheat prices were touching Rs 3,000 per quintal in Delhi and Madhya Pradesh. Due to aggressive sale of wheat in the open market under the Open Market Sale Scheme (OMSS), the market price has come down to the level of MSP of around Rs 2125 per quintal by the end of March in major wheat producing states.
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allocation shortfall
The normal allocation of wheat under the PDS is around 240 lakh tonnes. In 2022-23, due to low procurement, the allocation was reduced and states were allotted rice instead of wheat. Even in predominantly wheat consuming states, ration card holders are still getting more rice than wheat.
Apart from the PDS, the government allocates about 11 lakh tonnes of wheat under the Integrated Child Development Services (ICDS) and about 5 lakh tonnes of wheat under the Pradhan Mantri Poshan Shakti Nirman (PM-Poshan), formerly known as the mid-day meal scheme. Was. About 7 lakh tonnes of wheat is allocated to states that had issued more ration cards than those eligible by NITI Aayog for subsidized food grains under the National Food Security Act 2013. This is called NFSA tide over.
Thus, the total requirement of wheat is at least 263 lakh tonnes. This means that if the normal allocation of wheat is restored, the government will not have much leeway to allocate wheat under the OMSS, which has been used by subsequent governments as an effective tool to bring down wheat inflation. I have done
Allocation of some quantity of wheat under OMSS will be possible only if the allocation of rice in place of wheat continues in 2023-24 as well.
Wheat prices are generally lowest at the time of peak arrivals in April and May. but this year wheat inflation It was 15.5 percent in April. The government has procured 51.28 million tonnes of rice, which is credible, despite lack of rains and low production of rice last year in UP and Bihar, among other states. But non-PDS rice inflation in April 2023 stood at 11.4 per cent.
added uncertainty
As we move into the monsoon period, uncertainty looms large about the impact of El Niño on kharif crops, especially rice. Therefore, the government would be quite concerned about food inflation.
If the government continues with the reduced allocation of wheat, 2 to 3 million tonnes may be offered under OMSS.
Based on the behavior of El-Nino and its impact on the monsoon, the management of food inflation would call for proactive policies.
At present the duty on wheat import is 40 per cent. It is possible that in future the government may allow duty free import of wheat. If global prices sustain around $280 a tonne, it may become viable for flour mills in the coastal states of Tamil Nadu, Kerala and Andhra Pradesh to import wheat from October 2023. However, importing wheat to Karnataka ports may still not be viable as freight from Mangalore to Bangalore is Rs 1,500 a tonne.
Two consecutive weather events have affected India’s wheat surplus and diverted it from the global export market.
Saini is an agricultural economist and Hussain is a former secretary to the Government of India. Thoughts are personal.
(Editing by Anurag Choubey)