As the central government hasn’t yet announced the Open Market Sale Scheme (OMSS) for wheat in the current year, Indian consumers will probably feel the heat in prices of bread, biscuits, roti and paratha from next month onwards.
The atta, bread, and biscuit makers fear runaway inflation and lean season shortages in the absence of the OMSS scheme, which regulates open market supply and prices.
The effect is most noticeable in June, when demand increases due to the re-opening of educational institutes and an increase in snacking due to the onset of the monsoon season.The Food Corporation of India (FCI) on its website says that it sells wheat under OMSS from time to time to enhance the supply of food grains, especially wheat during the lean season, and thereby moderate the open market prices, especially in the deficit regions.
Depending upon the position of wheat in the market, the lifting of wheat from the FCI by the milling industry can vary from negligible amounts to about 7-8 million tonnes in a year.
As India had surplus wheat during the past 3 years, FCI had offered discounts and freight subsidies to dispose of the extra wheat it was carrying. The domestic wheat processing industry has procured 7 million tonnes of wheat from the government in 2021-22.
This year, if the government does not declare continuation of the OMSS policy, the industry will have to buy 100% of the wheat from the open market.
In a recent letter written to the Food Ministry, the flour milling industry has warned about the impending crisis: “It is clear that the government will be left with hardly any wheat to intervene in the market through the OMSS in the latter half of the year.”
“Wheat supply to the state governments for their own welfare schemes has also been stopped, which reflects the expected crisis.” The letter added: “The industry is apprehensive about being able to supply wheat flour in the market at reasonable prices in the future, which may result in a precarious situation for the milling industry and the downstream bread and biscuit industry.”
OMSS is the only weapon available to the government to control open market wheat prices. It is used as a market intervention programme by the government. The country’s milling industry has not seen such price volatility in the past.
The availability of wheat at an optimum price is the problem, as stockists and exporters are buying wheat at very high rates. Most of the medium and small-sized millers cannot stock wheat for the entire year, and currently, wheat is available at the mandis as the harvest season is going on. The real impact on prices may come after a month as the stockists may not bring wheat to the market till November or December, which is the lean season for wheat availability. In the absence of any other price discovery mechanism, OMSS prices act as the market benchmark price for wheat.
The government is expected to procure 19.5 million tonnes of wheat in the ongoing rabi marketing season, and it is carrying forward a stock of 18.99 million tonnes. Thus, from the estimated stock of 38.5 million tonnes, after meeting the obligation of 30.5 million tonnes under various welfare schemes and the buffer stock requirements of keeping 7.5 million tonnes of wheat for emergency use, industry fears that the government may not be left with much stock for the OMSS scheme.