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

The Economic Times - - Sports & Economy - Mad­hvi.Sally@ times­

Food min­is­ter

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

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