The reality of the so-called high market price of wheat

09-Sep-2024 02:11 PM

New Delhi. Although some people in the market are pressuring the government to allow duty-free import of wheat from abroad by making noise about high prices, but if looked at carefully and by analyzing the data, the reality seems to be something else.

The data shows that the total cost for traders / stockists and the prevailing price in the market are almost the same. To understand this equation, it is necessary to pay attention to some important facts.

It is worth noting that the Central Government increased the Minimum Support Price (MSP) of wheat by Rs 150 from Rs 2,125 per quintal in 2023 to Rs 2,275 per quintal for the Rabi Marketing Season of 2024 and an additional bonus of Rs 125 per quintal was also given on it in Rajasthan and Madhya Pradesh.

The government expected the total procurement of wheat to reach 340 lakh tonnes during the current year, but the actual procurement could reach only around 268 lakh tonnes.

This clearly shows that this time farmers got a higher price for mill quality wheat in the open market.

According to rough estimates, farmers got an average price of Rs 2,325 per quintal for wheat which is Rs 50 per quintal more than the government support price. This has brought a lot of relief to the producers.

Now if we include other expenses above this average price of Rs 2,325 per quintal, then the total purchase (cost) cost of wheat increases to Rs 2,500 per quintal including market fee, commission, gunny bags, wages and vehicle fare (transportation expenses).

After this, an average of Rs 27-28 per quintal is spent per month in the form of storage expenses and interest.

This expense for the last five months was Rs 150 per quintal and as per the current situation, the cost price of wheat in stock at the sellers' warehouse has become Rs 2,650 per quintal.

Adding other expenses including transportation, its price at Delhi comes to Rs. 2,730 per quintal whereas the price of wheat in Delhi is currently being reported to be Rs. 2,830 per quintal, in which the actual price after adding cash discount,

packaging and brokerage comes to Rs. 2,730 per quintal. If there is no significant difference between the cost price of the sellers and the prevailing price in the market, then how can the price of wheat be considered high? If the cost itself is high, then it is natural that it will also affect wheat products - flour, maida, semolina.

Talking about consumption, a family of 4 members consumes a maximum of 18-20 kg i.e. 240 kg in a year. Suppose if the price of wheat increases by Rs. 500 per quintal, then it becomes costlier by only Rs. 1,200 per year (Rs. 100/month).

In today's time, if you go to a restaurant once a day to eat, this much bill comes in one go. This figure does not include the subsidized wheat of 5 kg per member for 80 crore citizens. It includes only those consumers who are considered capable of buying it.

To control prices and maintain availability in the markets, the government banned exports, imposed stock limits and changed the limits from time to time, and sold under OMSS.

I-Grain India believes that if these steps were not taken, it would have been very difficult to stop the boom in the markets. At present, the markets are running on actual demand and supply.

Many organizations are pressurizing the government to open imports, complaining about the high prices without disclosing the actual cost of wheat.

Before taking any step, these organizations and the government must think whether the prices are really high. If imports are opened by creating pressure, will the prices not increase abroad?

Will this not have a direct impact on sowing? Due to the impact on productivity in the last 3 seasons, the stock in the central pool came down to the lowest level after a decade.

The rains happening in the Kharif season are good for the upcoming Rabi crops, and the farmers may get more interest in wheat due to higher prices. However, if the import duty is changed, it will not take long for the situation to change.

Overall, opening up imports can have a deep impact on the upcoming production. India needs bumper production for at least 2 consecutive seasons, only then the stock position and cost can come down.