Buyers, Traders Fear Punjab Issue May Raise Wheat Prices Situation seen as a throwback to 2003 when FCI had done a stock adjustment of 5mt of wheat on a single day, leading to a ban on exports
New Delhi: Traders and grain procuring companies say if reports of missing grain stocks in Punjab are true, it could trigger a rise in wheat price in domestic and international markets.
India is the world’s second largest wheat producer and consumer.
Reports of 5-6 million tonne disappearing from godowns of Punjab have been doing the rounds for some time now. Although the state government has said all stocks procured have been accounted for, it has not assuaged traders’ concerns.
“If news of stock disappearance from Punjab godowns turns out to be true, the situation can become very scary,” said head of a global trading company based out of Gurgaon.
“With current stocks as on April 1 at around 14.8 mt, if this news of disappearance of 6 mt is true, you are looking at actual opening stock of 8.8 mt, which could be a 10-year low.”
Traders ETspoke with said the government should revamp the structure of the Food Corporation of India (FCI) in order to make it more transparent and accountable. They said the situation reminded them of 2003, when FCI had done a stock adjustment of 5 mt of wheat on a single day, a situation that led the government to ban exports of the grain and prices firming up.
“Currently, the supply side of wheat is of great concern due to two successive droughts and an estimated sharp fall in rabi production of about 8-9 mt in 2015-16. Lower output and vanished wheat may trigger ideas of import, both on private and official account, sooner rather than later,” said a leading grain trader from Delhi. “Pressure for immediate removal of import duty of 25% will build up and local market prices will be firmer. Speculation of Indian wheat import will further escalate international prices.” At present, French wheat is selling at $174 (.`11,658) free on board (FoB) per tonne and Russian wheat is fetching $182 (.`12,194) FoB (1$=67 approx).
However, a trade analyst said as per clarification of the Punjab government and FCI, the matter appears to be of accounts reconciliation for several years due to change in “principles” redefined by the ministry for dis- bursement of credit to states for procurement of grain after 2003-04.
“If such ‘principles’ relate to accounting adjustments, then presumption of non-availability of stocks is meaningless. Such reconciliations may be pending with some other states as well,” he said.
Traders cited earlier said if modified “principles” relate to disappearance of stocks, damaged, non-edible or non–saleable grains due to sub-standard specifications, it needs to reflect in FCI stock holdings. Carry-in position for 2016-17 will reflect a steep decline due to lack of physical and damaged stocks, they said.
Traders are also concerned that if the controversy is not resolved expeditiously, withholding of further food credit will lead to squeeze in funding and affect wheat procurement from Punjab.
Withholding of further food credit will lead to squeeze in funding and affect wheat procurement from Punjab
Ram Vilas Paswan