Govt to decide if it wants to bring back open market sale scheme in Jan 2023
The Indian government will decide next month if it wants to bring back the open market sale scheme (OMSS) for wheat from January to March or if it wants to release some wheat through the public distribution system by giving states their old quotas. Even though exports aren’t allowed, wheat and atta (flour) prices keep going up.
But either of these choices will depend on the bigger question of whether the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) will continue in the next quarter. Under PMGKAY, which was started when the Covid pandemic broke out, the Centre gives out free food grains to people who live below the poverty line.
Since the current OMSS policy is only good until December 31, the Food Ministry probably won’t look at 2023 until February, according to sources. But prices haven’t gone down, even though more wheat was planted this rabi season, which should have made traders let go of wheat stocks they were holding on to. Sources say that because of this, the domestic wheat market needs some help.
Prices have gone up
In November, retail inflation for cereals (rice and wheat) was 12.96%, which was the second highest in the food basket after spices. Since January of this year, wheat prices have gone up by 13.4% and atta prices have gone up by 18%, according to the Consumer Affairs Ministry.
The Centre announced the OMSS wheat policy in February. It set the reserve prices at ₹2,200/quintal until September 30 and ₹2,225/quintal from October to December. But when the amount of wheat bought dropped to 187.9 lt in the rabi marketing season of 2022–2023 (April–March), the lowest amount in 15 years, the government stopped OMSS.
“It’s difficult to predict the price of wheat because the government needs to determine whether selling the grain under OMMS for less than the economic cost or at a subsidized rate will benefit consumers,” an official source said. The source also said that flour millers have said they are willing to buy even at the economic cost of ₹2,588.70/quintal because there is less of it.
Before the festival season and assembly elections, the Centre announced in September that PMGKAY would continue from October to December. This would cost ₹44,762 crore and involve the free distribution of an estimated 119.62 lakh tonnes (lt) of foodgrains (21.01 lt wheat and 98.61 lt rice) to 79.75 crore National Food Security Act beneficiaries (NFSA).
If the PMGKAY is extended for the rest of the current fiscal year, an additional 119.62 lt of grains will be needed. This could bring the stock of wheat and rice down to 92 lt and 137 lt, respectively, on April 1, 2023, compared to the buffer norms of 75 lt and 136 lt, leaving little room for OMSS, according to sources. Sources say that if PMGKAY isn’t extended, the government can use the same 21 lt under OMSS.
Wheat vs rice
But since the government cut the monthly allocation of wheat by more than 11 lt in May and gave the money to rice farmers instead, some states, like Uttar Pradesh, Madhya Pradesh, and Gujarat, have asked for some of it back so they can meet the needs of the people who eat roti (flat bread). When making a decision about OMSS, the government will also have to think about what people want.
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Also, the NFSA allocation of wheat was cut by 37,000 tonnes in Gujarat, 6 lt in Uttar Pradesh, and over 2 lt in Madhya Pradesh. This meant that more rice was given out. If these NFSA allocations were brought back, the market for OMSS wheat could shrink even more, sources said.